November 29, 2019 / 10:09 AM / 9 days ago

Euro zone inflation rises quicker than expected in November

BRUSSELS/FRANKFURT (Reuters) - Euro zone inflation accelerated faster than expected in November on a rise in food and services prices, likely comforting European Central Bank policymakers even if some factors pushing up prices may be only temporary.

FILE PHOTO: A shopper pays with a Euro bank note in a market in Nice, France, April 3, 2019. REUTERS/Eric Gaillard

The ECB has struggled for years to boost inflation, which has undershot its target of almost 2% despite unprecedented stimulus that included negative interest rates, 2.6 trillion euros worth of bond purchases and subsidized loans to banks.

Annual inflation jumped to 1% this month from 0.7% in October, outpacing expectations for 0.9%, as volatile food prices rose more than predicted, data from Eurostat showed on Friday.

More comforting for ECB policymakers, underlying inflation also rose faster than predicted as services inflation continued to accelerate since bottoming out in July, possibly due to a normalization in the price of package holidays in Germany.

Core inflation excluding food and energy prices picked up to 1.5% from 1.2% a month earlier, beating expectations for 1.3%. An even narrower gauge, which also excludes alcohol and tobacco prices, accelerated to 1.3% from 1.1%, ahead of forecasts for 1.2%.

The November rise is unlikely to signal a bigger shift in price trends, however, and the ECB expects inflation to accelerate only very slowly, undershooting its target for years to come.

Indeed, headline inflation is only expected to average 1% next year, then rise to 1.5% in 2021 as overall growth remains below what is considered the bloc’s potential, keeping price pressures muted.

In another comforting sign for policymakers, unemployment fell to 7.5% of the workforce in October, the lowest rate since July 2008, as the number of people without jobs fell by 31,000 to 12.334 million.

Although employment growth has slowed amid the bloc’s wobble, firms are maintaining their workforces, supporting expectations that the slowdown would not morph into a recession and a recovery would eventually materialize.

The ECB will next meet on Dec. 12 and its policy stance is not expected to change for months to come.

Reporting By Jan Strupczewski and Balazs Koranyi, editing by Francesco Guarascio, William Maclean

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