Eurozone inflation and unemployment rate hold steady

Eurozone inflation was steady in August and well below the European Central Bank’s 2% target, while the unemployment rate for July was also stable, underpinning the case for stimulus from the ECB.

Flash data from Eurostat showed that headline inflation in the currency bloc was unchanged on the month at 1.0% in August, in line with expectations. It was depressed mostly by lower energy inflation.

Meanwhile, core inflation - which strips out food and energy - was also unchanged, at 0.9%, versus expectations for a reading of 1.0%.

Other figures from Eurostat showed that the unemployment rate in the bloc was unchanged at a decade-low of 7.5% in July, in line with the consensus estimate.

Andrew Kenningham, chief Europe economist at Capital Economics, said the unchanged inflation and unemployment readings support the case for European Central Bank loosening.

"The scene is set for the ECB to loosen policy further in two weeks’ time," he said. "After preliminary data published yesterday showed that HICP inflation in Germany came in lower than anticipated, at 1.0% (consensus: 1.2%), it is perhaps something of a relief that the euro-zone aggregate inflation rate did not fall.

"However, today’s data offer little comfort to policymakers particularly as the core rate (excluding food, alcohol and tobacco) was unchanged at 0.9%, whereas we had expected it to edge up."

Kenningham said there is nothing in the releases to change the minds of ECB policymakers meeting the week after next.

"We still expect them to cut in the deposit rate from -0.4% to -0.5% and to provide further strong hints that more QE is on the way."