The eurozone's annual rate of inflation picked up to reach its highest level in almost two years during September, but a sustained rise toward the European Central Bank's target remains in doubt as the number of people without jobs rose for the second time in three months.
Consumer prices have risen more slowly than the ECB desires for more than three years, and were falling as recently as May despite a series of stimulus packages launched since June 2014 that have included a negative rate on deposits, a bond buying program that focuses on government issues but has been extended to corporate securities, and cheap loans for the currency area's banks.
The European Union's statistics agency Friday said consumer prices were 0.4% higher in September than a year earlier, a pickup in the annual rate of inflation from 0.2% in August and its highest level since October 2014. However, it remained well below the ECB's target of just under 2%.
Economists had expected inflation to rise in the final months of this year and in the early months of 2017 as earlier, sharp drops in energy prices come to an end. But without a pickup in domestic drivers of inflation, such as a rising number of workers with more money to spend, there are doubts about a more sustained increase toward the central bank's goal.
Indeed, Eurostat's figures showed that excluding energy, the rise in consumer prices slowed in September, to 0.8% from 0.9% in August. The measure of core inflation--which excludes energy, food, alcohol and tobacco--was unchanged at 0.8%.
Figures also released Friday help explain why price pressures have remained so weak. The eurozone's unemployment rate was unchanged at 10.1% for the fourth straight month in August, and stands at more than twice the U.S. rate. Worryingly, the number of people without work rose by 8,000, the second increase in three months. That suggests an improvement in the jobs market that was evident at the turn of the year has stalled, an indication that consumer demand will grow only modestly over coming months, making the ECB's task more difficult.
With its ability to meet its target still in question, many economists expect the ECB to announce an extension of its bond buying program beyond its scheduled expiration in March 2017.
"Together, the data support our view that the ECB has more work to do to return eurozone inflation to target on a sustained basis," said Jack Allen, an analyst at Capital Economics. "We think that the Bank will announce a six-month extension of its asset purchases in December."
Over recent months, ECB Mario Draghi has turned up the volume on calls for governments to do more to boost growth.
But there are disagreements within the ECB's governing council about the form that government action should take.
Earlier this month, Mr. Draghi joined the chorus of voices that have criticized Germany for reining in its spending at a time of weak economic growth. But in a speech Thursday, German Central Bank President Jens Weidmann--who sits on the ECB's governing council--said a fiscal stimulus program in Germany was unnecessary given the nation's robust economy, and would have few positive effects for other countries anyway.
