Higher EU Inflation and Unemployment Unwelcome Setback for ECB
CPI data from the European Union unexpectedly showed that inflation has remained at a 3-year high, complicating the European Central Bank’s task of bolstering the beleaguered EMU economy. The European inflation rate remained at 3% as per last month, instead of decreasing to 2.9% as a survey of economist had predicted it would. European unemployment data released simultaneously showed that the jobless rate rose to 10.2% in September from 10.1% last month.
The inflation-wary ECB earlier this month went against widespread calls to copy the Fed’s example and lower its interest rate, a move which would have encouraged economic growth but raised inflation even further. The release of today’s data is expected to complicate the economic crisis in Europe even further, with the ECB not likely to lower rates in its much-anticipated interest rate meeting later this week.
The market reaction to the inflation data showed the Euro continuing its downtrend against the US dollar, a move facilitated by Japan’s intervention early today which devalued the Yen and encouraged broad based support in the Buck.
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