Eurozone woes give Draghi leeway on QE

 
Chris Papadopoullos
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Draghi has so far held off from full QE
THE EUROZONE is still flirting with deflation while unemployment re­mains stubbornly high, opening up the possibility that the European Central Bank (ECB) will deliver further monetary easing when it announces its latest policy decision tomorrow.

Figures published yesterday by official database Eurostat showed that unemployment in August came in at 11.5 per cent – the same rate as during June and July.

The jobless rate is down from 12 per cent a year earlier, with most of that drop attributed to Portugal, Spain and Hungary where labour data nonetheless remains dire.

Germany’s unemployment rate re­main­ed flat at 4.9 per cent.

Meanwhile, an estimate released by Eurostat yesterday put annual inflation at 0.3 per cent in September down from August’s 0.4 per cent. The falling inflation largely reflected a lack of demand in the economy.

The disappointing data will give ECB boss Mario Draghi more freedom to undertake larger asset purchases. Draghi may even go so far as to announce the purchase of government bonds – a policy that German officials have opposed.

Draghi may wish to hold off on full quantitative easing, however, and to wait until after the next round of cheap loans are made to banks in December. Loans offered last month had a low take-up, but the second round is expected to be more popular.