Price growth and jobless fall eases pressure on ECB to act

Fri Nov 29, 2013 7:42am EST
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By John O'Donnell and Robin Emmott

BRUSSELS (Reuters) - A pick-up in inflation this month eases pressure on the European Central Bank to act next week, and the first fall in unemployment in almost three years shows a tentative euro zone recovery is gaining traction.

The double dose of data lent credence to the ECB view that the 17-country bloc is undergoing a gradual economic recovery more than five years after a financial crisis erupted, forcing five countries to seek emergency aid from their neighbors.

Consumer price inflation - the rate of increases in the cost of shopping and paying household bills - rose in the euro zone by 0.9 percent in November, slightly more than economists had predicted.

That put the annual inflation rate, measured on a basket of goods including cigarettes, beer and gas bills, on an upward path after an unexpected slip in October. While energy prices fell, the rising cost of food drove up the overall index.

The European Union's statistics office Eurostat also said on Friday that the euro zone jobless rate fell in October to 12.1 percent from the previous month's 12.2 percent, the first fall since February 2011.

"For the ECB, both indicators provide welcome news as they are preparing for next week's meeting," said Berenberg bank economist Christian Schulz.

The ECB, which holds a policy meeting next Thursday, cut interest rates earlier this month to a record low of 0.25 percent after inflation tumbled to 0.7 percent in October - far below its target of just under 2 percent.

Some ECB policymakers have since floated the idea of taking additional, less orthodox policy action to support the economy - such as asset purchases, or quantitative easing (QE).   Continued...

A pedestrian walks past an employment centre in London August 17, 2011. REUTERS/Suzanne Plunkett