INFLATION in the Eurozone continued its downward path this month, according to yesterday’s estimate, with consumer prices rising by only 0.5 per cent during the 12 months to March.
The rate dropped from 0.7 per cent in February, and fell by more than expected. Inflation in the currency union is now at its lowest since late 2009, when the euro area was coming out of the deflationary summer that followed the financial crisis.
The rate is now far below the European Central Bank (ECB) target or close to but below two per cent, and the low reading suggests that inflation in 2014 may even fall short of the much more modest forecast for one per cent.
“While the decline was partly due to Easter-related distortions, which are likely to fade in April, it still highlights the risk that inflation will remain exceptionally low for longer than the ECB forecasts. This reinforces the, already strong case for additional monetary policy easing,” said Gizem Kara of BNP Paribas.
The International Monetary Fund (IMF) European chief, Reza Mogadam, also weighed in on the outlook for Europe, saying that the ECB had more room to ease, and that the group was concerned about the current reality of low inflation, rather than just the potential for deflation.