Inflation jumped to a startling 3 percent last month in the 17 countries that use the euro, a surprise increase that makes it less likely the European Central Bank (ECB) will cut interest rates as soon as next week to head off a recession partly stemming from the eurozone debt crisis.
The rate reported yesterday from the EU’s statistics agency was the highest since October 2008 and represented a big increase from August’s 2.5 percent. The scale of the rise was unexpected.
The ECB, the chief monetary authority for the euro countries, has come under pressure to cut interest rates soon to ward off mounting signs of recession in the eurozone economy, which has come off the boil of late because of a waning global recovery and ongoing concerns surrounding Europe’s debt crisis.
Leading economic indicators have been falling to the point where some predict a downturn is imminent, after a weak 0.2 percent growth figure for the second quarter. Separate figures yesterday from the statistics office showed unemployment in the eurozone stuck at 10 percent in August.
“The latest eurozone CPI inflation and unemployment numbers would appear to reduce the chance of an imminent ECB rate cut,” said Ben May, European economist at Capital Economics.
The statistics office did not provide any details behind the surprisingly big increase. That will have to wait until the middle of next month when it publishes a more complete assessment.
However, German figures earlier this week showed inflation running at a higher-than-expected 2.6 percent on the back of higher oil prices and increases in the prices of clothing and shoes as merchants put out new fall and winter offerings.
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