Eurozone inflation slowed unexpectedly on oil prices in August, but remained above the target amid the central bank’s plan to eventually end asset purchases by the year end.
The unemployment rate in the 19-nation currency bloc held steady at the lowest since November 2008, official data showed Friday.
Inflation eased to 2 percent from 2.1 percent in July, according to flash data from Eurostat. The annual rate was expected to remain at 2.1 percent, which was the highest since December 2012.
The European Central Bank targets “below, but close to 2 percent” inflation.
Core inflation that excludes energy, food, alcohol and tobacco, slowed marginally to 1 percent in August from 1.1 percent a month ago.
August’s small decline in Eurozone inflation won’t deter the ECB from ending its net asset purchases this year, Jack Allen, an economist at Capital Economics, said.
But core inflation is still not on a sustained upward trend, so the bank will be in no hurry to raise interest rates. The economist expects the first hike to come next September at the earliest.
Bert Colijn, an ING economist, said headline inflation will slip below target in the months ahead.
The ECB needs improved core inflation to stay on track for its conditional path towards the end of quantitative easing in December and a rate hike at the end of summer 2019, Colijn noted.
Among the big-four economies, Germany’s EU harmonized inflation slowed to 1.9 percent from 2.1 percent in July. Likewise, Spain’s inflation came in at 2.2 percent, down from 2.3 percent a month ago.
Italy’s inflation slowed to 1.7 percent from 1.9 percent. Meanwhile, France’s inflation remained unchanged at 2.6 percent.
In a separate communique, Eurostat said the jobless rate stood at 8.2 percent, the same rate as seen in June, and in line with expectations, but down from 9.1 percent in July 2017. This was the lowest rate recorded in the region since November 2008.
The number of unemployed decreased by 73,000 from June to 13.381 million. Compared to the previous year, unemployment fell by 1.368 million.
The jobless rate among youth aged below 25, dropped to 16.6 percent in July from 16.8 percent in June.