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Eurozone inflation cools as Draghi reiterates need for low rates

Eurozone inflation cooled in August according to data published by Eurostat on Monday, even as the region’s central bank president Mario Draghi reiterated that low rates continued to be warranted for an extended period.

The annual rise in consumer prices across the single-currency region settled at 1.3% in August, down from 1.6% in July. The annual rate in August 2012 was 2.6%. Monthly inflation meanwhile was 0.1%. The annual core consumer price index remained at 1.1%.

The data arrived the same day the European Central Bank (ECB) President Mario Draghi said he is ‘encouraged’ by the fact that inflation expectations remain ‘firmly anchored’ and repeated the monetary authority’s promise to keep rates at record lows.

‘Given the overall subdued outlook for inflation extending into the medium term, the ECB’s Governing Council expects the key ECB interest rates to remain at present or lower levels for an extended period of time,’ Draghi said in a speech in Berlin on Monday.

In a more somber portion of his speech, Draghi warned that ‘the recovery is only in its infancy’, with the economy remaining ‘fragile’ and unemployment ‘still far too high’.

In this context, Draghi stressed that although the Eurozone has ‘taken important steps to restore stability’ there is still a need to continue reform agendas and ‘build on those foundations to create higher growth and employment’.

JM

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