By Paul Hannon

The annual rate of inflation in the euro zone fell further below the European Central Bank's target in July, and to its lowest level since October 2009.

The decline is a setback to the ECB, which in June launched a series of measures designed to boost growth and start to move the inflation rate back towards its goal of just below 2.0%. It is too soon for those measures to have had an impact, but the further drop in the rate at which consumer prices are increasing underlines the severity of the threat confronting policy makers.

Eurostat said consumer prices were just 0.4% higher than in July 2013, as the inflation rate slowed from 0.5% in June. The inflation rate has now been below 1.0% for 10 straight months.

Figures released by the European Union's statistics agency also showed that the jobless rate fell to 11.5% in June from 11.6% in May, reaching its lowest level since September 2012. The number of people without work fell by 152,000 during June, leaving 18.4 million unemployed.

That was the largest month-to-month decline in the number of jobless since December 2013.

The decline in the inflation rate is unlikely to prompt an immediate response from the ECB, which has said it may take as much as a year for the measures announced June 5 to take full effect. The central bank had expected the inflation rate to remain around its June level of 0.5% for some months to come.

Those measures included a cut in the central bank's main interest rates, as well as a new program of cheap, medium-term loans to banks that are intended to boost their funding of businesses.

There are some signs that after a disappointing second quarter, the euro zone's economy has regained some momentum, with July surveys of purchasing managers pointing to an increase in private-sector activity driven by Germany and the services sector. A monthly survey by the European Commission published Wednesday found euro-zone businesses were mostly undaunted by growing tensions between the European Union and Russia over Ukraine's future.

The accelerating decline in unemployment will likely encourage ECB policy makers, since it should boost consumer spending over the coming months, and in turn make it easier for businesses to raise their prices.

Indeed, figures released by Germany's statistics office Thursday showed retail sales rose by a surprisingly strong 1.3% in June.

Compared with June 2013, the number of people without work is down 783,000. Much of that reduction has been down to an improvement in Spain's jobs market, but unemployment has also been falling steadily in Ireland and Portugal, while it has remained low in Germany.

Write to Paul Hannon at paul.hannon@wsj.com