* Inflation at 0.7 percent in April versus 0.5 percent in
* Reading at the low end of expectations, keeps pressure on
* Investors to focus on ECB June meeting for longer-term
(Adds quotes, details on ECB's possible steps, inflation data)
By Robin Emmott and Anna Nicolaou
BRUSSELS, April 30 Euro zone inflation rose in
April, reducing chances the European Central Bank will act soon
to ward off deflation, but the pace of price rises was below
forecast and still within the ECB's "danger zone" of under 1
Annual consumer inflation in the 18 countries sharing the
euro nudged higher to 0.7 percent in April from March's 0.5
percent, which was the lowest since late 2009, the European
Union's statistics office Eurostat said on Wednesday.
The reading was lower than the 0.8 percent predicted in a
Reuters poll despite higher spending over the Easter period,
reflecting the poor state of the euro zone economy after a long
recession and with unemployment at near-record levels.
The euro briefly fell to a two-month low versus sterling on
the data but then recovered, with some traders saying they
expect markets to gain because the immediate chances of radical
steps by the ECB are now lower.
Faced with inflation rates running far below target, the ECB
has opened the door to money printing with so-called
"quantitative easing" (QE) to boost the euro zone economy, which
is growing at a slower rate than much of the rest of the world.
Some economists expect the ECB to follow other major central
banks like the U.S. Federal Reserve and embark on some form of
QE later this year, but others say it is a long way off because
the euro zone is nowhere near the most serious kind of deflation
such as that which took hold in Japan in the 1990s.
April's reading takes inflation back to where it was in
February but it is below the 1.2 percent of April 2013.
Still, the lack of a clear up-tick in consumer prices will
keep pressure on the ECB to act to stimulate the economy,
possibly by lowering rates again, although it is not expected to
do so at its next policy meeting on May 8.
"I don't think it's (the inflation reading) enough below
expectations in the ECB's forecasts to see them jump into
cutting the deposit rate at next week's meeting," said Paul
Robson, a senior strategist at RBS.
"They will probably wait until updated forecasts are due in
June. That will give them a better idea for the outlook. Core
inflation was in line with expectations, which gives them a
little cover to not do anything."
For a TABLE of inflation data:
For a GRAPHIC on inflation: link.reuters.com/kuj24s
"COMPELLING CASE" FOR ACTION
The ECB is due to publish updated staff forecasts for
inflation and growth stretching through to 2016 when its
policymakers meet in June.
Consumer inflation excluding volatile energy and food costs
was a touch higher this month than in March at 1.0 percent,
while Spain pulled out of deflation territory in April.
But while April improved overall because of a smaller fall
in energy prices, the pace of price rises in food, alcohol and
tobacco was lower than the month before, showing Europeans
remain unwilling to spend while economic growth is fragile.
The central bank targets inflation of just below 2 percent
over the medium term and the International Monetary Fund wants
to see the ECB take radical steps that could include
"We continue to believe that there is a compelling case for
additional monetary policy accommodation," said Ken Wattret, an
economist at BNP Paribas. "We forecast lower policy rates in
June, with asset purchases to follow in the second half on the
back of continued low inflation prints over the summer."
The euro zone's economy is expected to grow just 1.2 percent
this year after two consecutive years of recession, improving to
1.8 percent growth in 2015, according to the European
Commission, the EU executive.
Last week, ECB chief Mario Draghi said that only a
deteriorating inflation outlook or a loosening of medium-term
inflation expectations would be reasons to start broad based
(Additional reporting by Paul Carrel in Frankfurt; Editing by