2018.05.3108:46:00UTC+00Eurozone Inflation At 13-Month High; Meets ECB Target

Eurozone consumer prices increased at the fastest pace in more than a year in May on energy prices, giving space for the European Central Bank to start scaling back its asset purchase programme.

Despite a slowdown in economic growth at the start of the year, the unemployment rate declined in April to the lowest since late 2008, data showed Thursday.

Inflation rose more-than-expected to 1.9 percent in May from 1.2 percent in April, flash estimate from Eurostat revealed. A similar high rate was last seen in April 2017. The expected rate was 1.6 percent.

Inflation was in line with the ECB's target of 'below, but close to 2 percent'.

Core inflation that excludes cost of energy, food, alcohol and tobacco, also increased in May, to 1.1 percent from 0.7 percent a month ago.

Recent increases in oil prices will push headline inflation above 2 percent next month, Stephen Brown, an economist at Capital Economics, said. "While the recent drama in Italy creates a headache for the ECB, we doubt that it will prevent the Bank from ending QE this year."

All components of the harmonized index of consumer prices, except non-energy industrial goods, logged faster annual growth. Cost of food, alcohol and tobacco climbed 2.6 percent after rising 2.4 percent. The increase in energy cost increased sharply to 6.1 percent from 2.6 percent.

Among major economies, Germany's inflation climbed to 2.2 percent from 1.4 percent and France's inflation to 2.3 percent from 1.8 percent in April.

Likewise, Spain's HICP inflation came in at 2.1 percent versus 1.1 percent a month ago. Italy's rate reached 1.1 percent compared to 0.6 percent in April.

Another report from Eurostat showed that the unemployment rate fell to 8.5 percent in April from 8.6 percent in March.

This was the lowest since December 2008. Nonetheless, the rate was slightly above the expected 8.4 percent.

Unemployment decreased by 56,000 from the previous month to 13.88 million in April. Compared to the previous year, unemployment fell 1.088 million.

The youth unemployment rate dropped marginally to 17.2 percent in April from 17.3 percent in March.