Euro inflation cools to 3.2 per cent in October

BRUSSELS: Inflation in the euro zone fell to 3.2 per cent in October, continuing its slide from record highs as oil prices tumble, the EU statistics agency said Friday.

Eurostat also said the unemployment rate held steady at 7.5 per cent in September, a sign that the economic slowdown has not yet forced companies to shed jobs.

Lower yearly inflation, down from 3.6 per cent in September, gives the European Central Bank more room to reduce borrowing costs next week, which might help ease lending as the 15-nation economy slows.

The ECB has insisted that tackling high inflation is its main priority.

High fuel and food prices have kept inflation far above the ECB's guideline of just under 2 per cent for the past year.

That is changing as oil prices have fallen by over a half from a July high on worries that a slowing global economy will slash demand.

The euro central bank was slower than the US Federal Reserve, the Bank of England and others in reducing rates in the wake of a credit crisis that saw banks reluctant to lend to each other, only joining a coordinated rate cut earlier this month. That move brought rates down from 4.25 percent to 3.75 per cent.

Economists expect the ECB to reduce rates when it meets on Nov. 6, and possibly again in December, as economic weather vanes show that the euro area is decelerating sharply. Business and consumer confidence hit a 15-year low in October as demand falls.

Eurostat said the October inflation figure was a first estimate that it will confirm and explain on Nov. 14.

It also said some 11.7 million people in the currency zone were seeking work in September, giving an unemployment rate of 7.5 per cent, the same as in August.

Spain has jumped to the front of the line with the highest euro jobless rate of 11.9 per cent as a housing bubble bursts and the economy risks a recession. Ireland, facing a similar situation, also saw unemployment grow to 6.6 per cent.

Germany, the euro's largest economy, had a jobless rate of 7.1 per cent, while France had a 7.9 per cent rate, Eurostat said.

Unemployment figures often lag other statistics in showing that an economy is slowing. Analysts expect the rate to climb in coming months.