March 28, 2024

EU inflation fell to 3 year lows

Expectations were already high that the ECB would cut its main interest rate from its all-time low of 0.75 percent at its monthly policy meeting on Thursday despite reservations from some members on its governing council.

Analysts said Tuesday’s figures from Eurostat, the European Union’s statistics office, have increased the likelihood of a reduction in borrowing rates.

The preliminary April rate is way below the ECB’s target of keeping inflation “close to but below” 2 percent and therefore gives the central bank more room for manoeuver.

“If an ECB rate cut on Thursday didn’t look nailed-on before, it certainly does now,” said Craig Erlam, market analyst at Alpari.

Eurostat indicated that falling energy prices were largely behind the fall as well as lower service sector inflation. A fuller explanation behind the drop will emerge in a more detailed report in May.

With 19.2 million people out of work in the eurozone, up 62,000 during the month, policymakers have a huge task ahead of them to turn the region’s economy around and keep their long-suffering people on board as they suffer the effects of austerity measures designed to get public finances into shape.

While Germany, Europe’s largest economy, has an unemployment rate of just 5.4 percent, others such as Spain are languishing with a record jobless rate of 26.7 percent. Greece has the highest unemployment rate in the eurozone though its figures are compiled on a different timeline. In January, its jobless rate stood at 27.2 percent.