(Reuters) - Euro zone inflation dropped sharply to nearly four-year lows in October and unemployment stuck at record highs in September, increasing pressure on the European Central Bank to do more to protect economic recovery.
Inflation fell to 0.7 percent year-on-year in October - the lowest reading since November 2009 - a flash estimate from the European Union's statistics office showed on Thursday. It was lower than any forecast from economists in a Reuters poll.
The inflation rate dropped below 1 percent for the first time since February 2010. Analysts had expected the inflation rate to be unchanged at 1.1 percent in October.
The ECB, which meets next Thursday, wants to keep inflation below, but close to 2 percent over the medium term. Its main refinancing rate is now already at a record low of 0.5 percent.
"We see December as the most probable timing for a 25 basis points cut in the refi rate, in tandem with another round of low staff projections for inflation, including for 2015," Ken Wattret, chief euro zone market economist at BNP Paribas said.
The 9.5 trillion euro economy of 17 countries sharing the single currency returned to growth in the second quarter but fiscal consolidation, high unemployment and weak business and consumer confidence are preventing a more robust rebound.
Adding to factors in favor of a rate cut was the strength of the euro, which has been appreciating since early September, although on the day the inflation data and increased chances of a rate cut sent to euro lower to 1.3660 against the dollar from 1.3690.
Eurostat said that costs of food, alcohol and tobacco products rose by 1.9 percent, but at the same time prices of energy fell 1.7 percent year on year.
Excludes prices of energy, food alcohol and tobacco, inflation slowed to 1.1 percent year-on-year from 1.4 percent in September, Eurostat said.
RECORD HIGH UNEMPLOYMENT
Price growth is also kept in check by record high unemployment. Eurostat previously reported...
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