Eurozone unemployment at record high as inflation drops

The European Central Bank, headquartered in Frankfurt, will announce its interest rate decision on Thursday The European Central Bank, headquartered in Frankfurt, will announce its interest rate decision on Thursday

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Unemployment in the eurozone has surged to a fresh record high, while inflation has fallen to a three-year low, boosting expectations that the European Central Bank will cut interest rates.

Unemployment in the 17 countries using the euro hit 12.1% in March, up from February's 12%, according to official figures from Eurostat.

In total, 19.2m people are now out of work in the region.

Separate Eurostat data showed that inflation slowed to 1.2% in April.

Greece and Spain recorded the highest unemployment rates in the eurozone, at 27.2% and 26.7% respectively, while Austria, at 4.7%, and Germany, at 5.4%, had the lowest rates.

Youth employment, defined as those under 25, hit 3.6 million in the eurozone. In Greece, 59.1% of under-25s were unemployed as of the end of January, while in Spain, 55.9% were unemployed.

Inflation falls

Meanwhile, separate data from Eurostat showed consumer prices rose 1.2% in the year to April across the eurozone, a marked slowdown from March's 1.7% rise.

The slowdown, driven by a sharp fall in energy prices, means inflation in the eurozone is now at its lowest level since February 2010.

The figure was much lower than the fall to 1.6% that analysts had expected.

Interest rate cut

Economists said that the disappointing data had increased the likelihood of the European Central Bank announcing a cut in interest rates when it reveals its decision this Thursday.

``If an ECB rate cut on Thursday didn't look nailed-on before, it certainly does now,'' said Craig Erlam, market analyst at Alpari.

Marie Diron, senior economic adviser at Ernst & Young, added: ``It now seems pretty certain that it will lower interest rates."

A Reuters survey last week found that a majority of economists expect the European Central Bank (ECB) to cut the bank's main refinancing rate by 25 basis points to a record low of 0.5%.

If the ECB was to cut rates, it would mark its first reduction since July last year.

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