Inflation Gathering Steam in Europe as Unemployment Declines

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Not that long ago, the European Central Bank decided to trim the monthly bond purchases and commit to keeping interest rates low. After all, negative interest rates have been a hallmark of Europe. But what will the central bank do if inflation starts to get too high?

Eurostat, the statistical office of the European Union, has released its flash reading for inflation in November. The gain of 1.5% was up from 1.4% in October.

U.S. inflation, on the other hand, has been challenging (and in some cases exceeding) the 2.0% to 2.5% target range of the U.S. Federal Reserve.

According to Eurostat, energy is expected to have the highest annual rate in November with a 4.7% gain. That compares to a 3.0% gain in October. The area of food, alcohol and tobacco rose by 2.2% in November, down from a 2.3% gain in October. The price for services held steady at 1.2% in November, and the prices of non-energy industrial goods held steady at a 0.4% gain.

Europe’s unemployment rate has now also hit its lowest level since the start of 2009. That being said, the euro area unemployment rate was shown to be 8.8% in October, versus 8.9% in September. The EU28 unemployment rate was 7.4% in October 2017, down from 7.5% the prior month.

As a reminder, the euro area consists of Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal, Slovenia, Slovakia and Finland.