Euro-area inflation remains at 0.2% as core rate increases

[BERLIN] The euro-area inflation rate held steady in July, highlighting the challenge facing the European Central Bank as it seeks to stoke price growth in the 19-nation bloc.

The annual inflation rate was 0.2 per cent, unchanged from June and matching the median forecast of economists in a Bloomberg survey. Core inflation unexpectedly accelerated to 1 per cent, the fastest in 15 months, the EU's statistics office in Luxembourg said in a report on Friday.

While prices have risen for the past three months, inflation remains well below the ECB's goal of just under 2 per cent. The International Monetary Fund this week cited lingering low inflation as a downside risk for the region and said the ECB will have to continue its asset-buying stimulus programme beyond September 2016.

Separate data today showed the euro-area unemployment rate held at 11.1 per cent in June, missing economists' forecast for a decline to 11 per cent. The rate compared with 11.6 per cent a year earlier.

Economic confidence in the euro area hit a four-year high this month, the European Commission said Thursday. Sentiment got a lift after Greek Prime Minister Alexis Tsipras agreed to new fiscal commitments in return for another bailout. There are now questions over his ability to deliver, with rebels within his own party rejecting his plan to seek a new deal.

Recent data have shown a mixed picture for the euro-area economy. While German business confidence unexpectedly rebounded in July, a manufacturing index declined. In France, a factory gauge signaled contraction.

The ECB expects euro-area inflation to remain low in the coming months before it accelerates to 1.5 per cent in 2016. It sees the economy growing 1.5 per cent this year and 1.9 per cent in 2016.

BLOOMBERG