Eurozone inflation drop opens door to lower interest

The 15 countries which use the euro saw inflation tumble in November by the steepest rate in almost two decades, keeping up the pressure for further cuts in interest rates to counter the effects of recession. Consumer price inflation in the eurozone dropped by 1.1 percentage points to 2.1 per cent, that is more than analysts had predicted.

It also means inflation is now virtually half of the rate it was just this summer, when central bankers were reluctant to lower the cost of borrowing for fear of pushing it up even further. Now it is within spitting distance of the European Central Bank’s target of below – but close to – 2 per cent and that means Jean-Claude Trichet and the governing council have ample room to manouevre. They have already cut rates by a total of one percentage point in October and November and many analysts believe another percentage point could come off at Thursday’s meeting.

But as inflation dies back, unemployment in the eurozone has jumped more than expected. In October, the rate picked up to 7.7 per cent.
Individually, Spain and France posted the greatest jobless rate rises.

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