Eurozone inflation rate ticks up to 1.5%, but misses forecasts

Inflation in the eurozone hit 1.5 per cent this month, up from 1.4 per cent in October, but was weaker than the 1.6 per cent reading economists had expected.

Core inflation came in at 0.9 per cent — the same as last month. The core inflation figure strips out price changes for more volatile items such as oil and food prices.

The figure has fallen in recent months. The lack of a rebound in core inflation this month will stoke concern by the region’s central bankers, who view the measure as a better indicator of longer term inflationary pressures. Central banks target inflation of just under 2 per cent.

Separate figures for unemployment showed the rate had fallen to 8.8 per cent last month, from 8.9 per cent in September.

Unemployment is now at its lowest level since the beginning of 2009.

“October’s fall in eurozone unemployment will offer some reassurance to the [European Central Bank] as it prepares to reduce the pace of asset purchases, but the still-low rate of core inflation in November supports its cautious approach,” said Jennifer McKeown, of Capital Economics.

Economists did not expect the ECB to change course. It has revealed plans to cut the pace of purchases from the current level of €60bn a month, to €30bn from January — in part because of better news on the labour market.

“The euro area core HICP number should indeed raise concerns about the slow responsiveness of consumer prices to stronger growth, but I suspect that the ECB will continue to expect lower unemployment to result in higher wage growth and inflation in 2018,” said Frederik Ducrozet, economist at Pictet Wealth Management.

Richard Barwell, economist at BNP Paribas Asset Management, said: “Underlying inflation is weak and will remain weak for some time, but I think many Council members will focus on the increasingly encouraging growth dynamic and the fact that the unemployment rate keeps dropping.”

Ms McKeown said: “There are reasons to expect the core rate to pick up a little in the months ahead. The economy is performing very well and spare capacity should be eliminated next year. What’s more, the labour market is still recovering.”

The common currency extended its decline on Thursday and hit a session low after the mixed batch of data on eurozone inflation.

The euro fell as low as $1.1810 shortly after the release of data by Eurostat, the bloc’s statistics agency from $1.1835 prior to the release. It ended the day on Wednesday at $1.1856, according to Reuters data.