Business | Economy
Europe's flat jobless rate, tame inflation show recovery continues
Figure strengthens expectations ECB will not change interest rate
- Reuters
- Published: 00:00 July 31, 2010
- 1.0%: expected interest rateto be fixed by ECB
- 10%:unemployment rate in Eurozone
Brussels: Eurozone unemployment was flat at 10 per cent for the fourth month running in June and inflation remained muted in July, boosting the case for the fragile economic recovery to be nursed with low interest rates.
European Union statistics office Eurostat said inflation in the 16-nation currency area edged up to 1.7 per cent year-on-year in July from 1.4 per cent in June, in line with economists' expectations and comfortably below the European Central Bank's target of just under 2 per cent.
The inflation figure strengthens expectations that the ECB will keep its main interest rate unchanged at an historic low of 1.0 per cent into 2011, especially as the recovery is modest and could still falter.
"There remains a compelling case for the ECB to keep interest rates down at 1.0 per cent not only through 2010 but deep into 2011, given that euro zone growth remains at risk from tightening fiscal policy in a number of countries and a loss of momentum in global growth," said Howard Archer, chief Europe economist at IHS Global Insight.
Jennifer Mckeown, Europe economist at Capital Economics, said: "July's increase in Eurozone inflation probably reflected developments in energy and food prices, while underlying inflation remains extremely subdued. The flat unemployment rate is the latest in a string of indicators that have shown the Eurozone continues to recover from the worst economic crisis in decades, despite turbulence on sovereign debt market and uncertainty about the health of banks.
But with the rate still near a 12-year high, growth may falter later in the year, partly due to fiscal austerity ordered by many governments to prevent Greece's debt crisis from spreading to other countries.
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