Eurozone inflation climbed to a four-month high in August that could prompt the hawks in the European Central Bank to call for tapering during the rate-setting session next week.
The unemployment rate in the currency bloc remained unchanged at the lowest level in more than eight years in July, reflecting stronger economic activity.
Largely driven by energy prices, inflation accelerated to 1.5 percent in August from 1.3 percent in July, flash data from Eurostat showed Thursday. This was the highest since April and above the expected rate of 1.4 percent.
Inflation continues to stay well below the ECB’s target of ‘below, but close to 2 percent’.
At the same time, core inflation that excludes energy, food, alcohol and tobacco, held steady at 1.2 percent in August. Final data for August is due on September 18.
In a separate communique, Eurostat said the jobless rate held steady at 9.1 percent in July, the lowest since February 2009. The rate also matched expectations.
The number of unemployed increased by 73,000 from June to 14.860 million in July.
However, the youth unemployment rate remained at an elevated level. The jobless rate among youth, aged below 25, rose slightly to 19.1 percent in July from 19 percent in June.
Data add to the evidence that monetary policy support can be reduced, Jennifer McKeown, an economist at Capital Economics, said. But the ECB will need to tread very cautiously given the still low inflation expectations and the strength of the euro, the economist added.
The ECB will announce a “dovish tapering” in October, giving the markets the impression that QE could be lengthened into the second half of next year, if need be, Peter Vanden Houte, an ING economist, said.
At the same time, a deposit rate hike is not to be expected before the end of 2018, he said.
Consumer price data showed that the increase in inflation was largely driven by energy prices. The annual growth in energy prices increased to 4 percent from 2.2 percent.
Meanwhile, the increase in food prices remained at 1.4 percent and that in non-energy industrial goods at 0.5 percent. Likewise, services costs rose again by 1.6 percent.
The EU28 jobless rate also remained unchanged in July, at 7.7 percent, data showed. This was the lowest rate recorded in the EU28 since December 2008.
According to the Federal Labor Agency, Germany’s jobless claims declined by 5,000 in August from July. Economists had forecast a decrease 6,000. The jobless rate held steady at 5.7 percent in…