“Euro-area inflation at a three-year low and record unemployment increased pressure on theEuropean Central Bank to cut interest rates later this week to spur lending and growth.
The annual inflation rate dipped to 1.2 percent in April, thelowest since February 2010, from 1.7 percent a month earlier, the European Union’s statistics office in Luxembourg said today. The rate has been below the ECB’s 2 percent ceiling since February. The March jobless rate advanced to 12.1 percent, the highest since the data series began in 1995.
The ECB’s Governing Council will cut its benchmark rate to a record low 0.50 percent on May 2 from 0.75 percent, according to the median of 70 economists’ estimates in a Bloomberg News survey. The Frankfurt-based central bank sees inflation at 1.6 percent this year and 1.3 percent in 2014.
“If it weren’t for the ECB’s usual reluctance to make large changes, there would be a strong case to cut by 50 basis points, and I think the likelihood is perhaps higher than the market expects,” Frederik Ducrozet, an economist at Credit Agricole SA (ACA), said by telephone from Paris. “It’s probably around 20 percent, because with inflation that low it’s really the best time to do such things and maximize the impact on the market.”
