The outlook for inflation in the Euro-Zone fell more than expected as the index reached its lowest level since the euro was introduced in 1999. The CPI estimate for January slipped to 1.1% from 1.6% in previous month, and as price growth falls below the ECB’s 2% target, policymakers may step up their efforts over the coming months as the risks for deflation intensify. Meanwhile, the unemployment rate increased for the fifth consecutive to 8.0% from a revised reading of 7.9% in November, which suggests that the real economy is now feeling the spillover effects from the financial crisis, and the labor market is likely to deteriorate further as firms continue to face financial uncertainties. The data continues to reflect a dour outlook for the euro-region as growth prospects deteriorate at a rapid pace, and alleviating price pressures should allow the European Central Bank to ease policy further over the near-term as policy makers maintain their one and only mandate to ensure price stability.
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