June's inflation reading was the second upward move from a three-year low of 1.2 percent in April, although it remains beneath the European Central Bank's target of just under 2 percent. June's rise was driven rather by unfavorable base effects and the ECB has flagged the possibility of short-term inflation volatility. Prices of food, alcohol and tobacco products were the key factor driving inflation in June, followed by energy and services.
The ECB said last week it will keep its accommodative monetary policy stance to help a gradual economic recovery that is expected to start in the second half of this year. "The low inflation rate will permit the ECB to leave interest rates at very low levels for a long time," said, an economist at Commerzbank, who expects the bank to start increasing rates at the end of next year.
The euro zone's economy has been stuck in a recession for the past year and a half, feeling the aftermath of its banking and debt crisis that has driven unemployment to record levels. Growth is likely to be minimal in the rest of 2013. Still, the bank is not expected to cut its main interest rate from a record low of 0.5 percent when it meets on Thursday, preferring to keep pressure on European governments to push ahead with difficult economic reforms.
European Union leaders reiterated at a summit last week they would step up the fight against unemployment, which stood at 19.2 million in the euro zone in May, and agreed to launch a special scheme for young jobless Europeans. But the 6-billion-euro ($7.8-billion) plan over two years is unlikely to be enough to tackle youth unemployment that is near 60 percent in Greece and Spain. Overall, close to six million people between the ages of 15 and 24 are without a job, prompting talk of a "lost generation" and concerns of unrest.
Draghi and Bernanke were both students of the same professor at MIT, Professor Fischer. They have the same philosophy and our results resemble Europe’s. When will these people learn to allow markets to work?