Eurozone inflation eases to 2.7 percent

By the Associated Press | May 31, 2011 | 5:59 AM EDT

FRANKFURT, Germany (AP) — Inflation eased to an annual rate of 2.7 percent in May for the 17 countries that use the euro, surprising markets and taking some pressure off the European Central Bank to keep raising interest rates.

The figure fell from 2.8 percent the month before, the European Union statistics agency Eurostat said Tuesday. The drop was unexpected for markets, which had predicted 2.8 percent or even 2.9 percent.

Eurostat's report was only a first estimate of inflation and did not contain details on why inflation eased. Analysts say a dip in high oil prices was likely the main factor.

The ECB raised its key rate by a quarter-point to 1.25 percent in April, and is weighing how fast to continue with increases to prevent higher inflation from being built into the economy through wage hikes.

The bank relies more on forecasts than on monthly figures, which look to the past. But the data will support calls for the European Central Bank to take it slow, even though the May figure remains above the bank's goal of just under 2 percent.

Bank President Jean-Claude Trichet has said the ECB, the monetary authority for the eurozone, is determined to keep inflation from getting out of hand. The bank has stayed with an anti-inflation message even though higher rates could make life harder for the small part of the eurozone — Greece, Portugal and Ireland — that is strugglig with debt crises and recessions.

The May inflation figure is a flash estimate and could be revised later.

Meanwhile, the eurozone's unemployment rate was unchanged at 9.9 percent in April. The lowest rates were 4.2 percent in Austria and the Netherlands, while Spain continued to struggle with 20.7 percent, and a youth unemployment rate for under 25s of 44 percent.