Tuesday 6 December 2016

Stimulus case bolstered as eurozone inflation revised down

Published 25/02/2016 | 11:11

Eurostat said the annual rate of inflation in January was 0.3%, against its previous estimate of 0.4%
Eurostat said the annual rate of inflation in January was 0.3%, against its previous estimate of 0.4%

Inflation across the 19-country eurozone was lower than previously thought in January, official figures have shown.

  • Go To

The development will likely further strengthen expectations that the European Central Bank (ECB) will back more stimulus next month.

Eurostat, the European Union's statistics agency, said the annual rate of inflation in January was 0.3%, against its previous estimate of 0.4%.

The revision was not anticipated in the markets and comes ahead of Monday's first estimate for February. The figure could go a long way to determining what the ECB does at its next policy meeting on March 10.

The ECB is in the midst of a massive stimulus programme that is designed to get inflation back toward its target of just below 2%.

By keeping interest rates low and pumping money into the economy via a bond-buying programme worth over a trillion euros, the ECB is hoping to generate enough economic activity to get prices rising.

ECB president Mario Draghi has repeatedly hinted that the central bank is ready to consider more support for the economy.

Inflation has been below target since February 2013 for a variety of reasons, not least the fall in oil prices.

The consensus in markets is that the rate will drop to 0.1% in February because of renewed weakness in oil prices, which analysts say will seal the deal on further stimulus.

"Caution is very much the watchword for Draghi and co. at present," said Dennis de Jong, managing director of UFX.com.

Underlying price pressures in the eurozone are very soft. Even after stripping out the volatile items of energy, food, alcohol and tobacco, the eurozone's core inflation rate remains below target at 1%.

On an individual basis, six of the eurozone's countries - Cyprus, Greece, Latvia, Slovenia, Slovakia and Spain - are currently recording inflation rates below zero.

Press Association

Read More

Promoted articles

Editors Choice

Also in World News