A huge euro logo is pictured next to the headquarters of the European Central Bank (ECB) before the bank's monthly news conference in Frankfurt Aug. 7, 2014.© Ralph Orlowski / Reuters
Euro-area inflation slowed in September, challenging European Central Bank officials gathering this week to decide if more measures are needed to avert deflation.
Consumer prices rose an annual 0.3 per cent, the European Union's statistics office in Luxembourg said today. That's in line with the median estimate in a Bloomberg News survey and follows a reading of 0.4 per cent in August. Unemployment held at 11.5 per cent in August, Eurostat said in a separate report.
ECB President Mario Draghi told lawmakers in Brussels on Sept. 22 that policy makers remain "fully determined" to shore up inflation, which has undershot the central bank's goal since early 2013. Policy makers have agreed on unprecedented stimulus in the past four months, and are set to unveil details of an asset-purchase plan that will help add as much as €1-trillion ($1.3-trillion) to the ECB's balance sheet.
Low inflation "is a sign of incredible weakness of economic activity in the euro zone," said Christopher Matthies, an economist at Sparkasse Suedholstein in Neumuenster, Germany. "It's looking bleak right now, and I don't see any short-term relief."
Euro-area economic confidence slipped this month to the lowest level since November, while manufacturing and services growth unexpectedly slowed to the weakest pace this year, according to preliminary data by Markit Economics.
Energy prices dropped 2.4 per cent in September from a year earlier after falling 2 per cent the previous month, today's preliminary report shows. Prices of alcohol, food and tobacco increased 0.2 per cent, while the cost of services was up 1.1 per cent.
Core Inflation The core inflation rate, which strips out volatile items such as energy, food, tobacco and alcohol, slowed to 0.7 per cent this month from 0.9 per cent in August, according to Eurostat, which will release updated data on Oct. 16.
In addition to cutting interest rates to record lows and offering long-term loans to banks, the ECB has committed to buy asset-backed securities and covered bonds to steer price gains back toward its goal of just under 2 per cent. Details of the plan are set to be revealed after the 24-member Governing Council meets in Naples, Italy, on Oct. 2.
Policy makers will leave the benchmark rate unchanged at 0.05 per cent and the deposit rate at minus 0.2 per cent, according to all economists in a separate Bloomberg News survey.
The euro-area jobless rate in August was in line with the 11.5 per cent median forecast of 29 economists in a Bloomberg News survey and down from last September's peak of 12 per cent.
Spain had the highest unemployment rate across the bloc, at 24.4 per cent, and Austria the lowest, at 4.7 per cent.