Euro Zone Reduces Inflation Rate Below 3 Percent; First Time In 12 Months

Brussels, Belgium (AHN) - Data from Eurostat showed that inflation rate in the euro zone went down to 2.1 percent in November. It is the first time it has fallen below 3 percent in the past 12 months.

The news triggered speculation it would lead the European Central Bank to reduce key interest rates sharply next week from its present rate of 3.25 percent.

While prices were decelerating, unemployment rate across the 15-member euro zone was going up to 7.7 percent in October from 7.5 percent the previous month. The Netherlands has the lowest joblessness rate at 2.5 percent, while the highest belongs to Spain at 12.8 percent.

According to Howard Archer from IHS Global Insight, the dip in inflation rate and uptick in unemployment will likely warrant a one percentage point reduction when the ECb meets next week. Citigroup economist Juergen Michels aired a similar forecast ranging from 75 to 100 basis points reduction in benchmark interest rates.

Axel Weber, ECB council member and head of Germany's Bundesbank said at a recent speech, quoted by Deutsche Welle, "The receding inflationary pressure has created ample room for European monetary policy, which will be also used given the rapidly deteriorating economic outlook."