Rate of euro zone inflation slows

The rate of inflation in the euro zone slowed last month, lessening the case for an interest rate change when the European Central Bank meets tomorrow.

Official figures released yesterday showed that consumer prices rose by 1.1 per cent year-on-year in September, compared to an annual 1.3 per cent in the year to August.

The inflation figure, which was lower than analysts had expected, represents the lowest inflation rate since February 2010, and is well below the ECB’s target of ‘close to but below’ 2 per cent. It was driven mostly by a 0.9 per cent drop in energy prices, while the rise in the cost of food, alcohol and tobacco also slowed last month.

The figures come ahead of tomorrow’s monthly governing council meeting of the European Central Bank in Paris, one of two rate-setting meetings that take place outside Frankfurt each year.

It is the first meeting since last month's much-anticipated Federal Reserve meeting at which the US bank announced it would not yet taper its quantitative easing programme. The move eases the pressure on Mario Draghi to introduce any stimulus measures when the governing council.

The ECB president said last week that the Frankfurt-based bank would be prepared to intervene to keep market interest rates low if needed.

Speaking last week, Mr Draghi said the bank could use a long term refinancing operation (LTRO), a form of long-term loans, if needed. “We are ready to use any instrument...to maintain the short-term money market rates at a level which is warranted by our assessment of inflation in the medium-term,” he said.

Mr Draghi is likely to be quizzed on next year’s asset quality review of euro zone banks, as the ECB prepares to take direct supervisory control of around 130 banks.

European unemployment
Meanwhile, European unemployment figures due to be published today are expected to show no easing-off in the bloc's unemployment rate. Unemployment in the euro zone stood still at 12. 1 per cent in July, with unemployment across the 28-member European Union also flat compared to the previous month at 11 per cent.

More than 28 million are out of work across the EU. In the under-25 age bracket, 24 per cent are unemployed in the euro zone and 23.4 per cent across the EU.