Thursday 22 March 2018

Euro zone inflation confirmed at -0.1pc in September

ECB President Mario Draghi said the risks for the euro are on the downside. Reuters
ECB President Mario Draghi said the risks for the euro are on the downside. Reuters

Annual inflation in the euro zone turned negative in September due to sharply lower energy prices, the EU's statistics office confirmed on Friday, maintaining pressure on the European Central Bank to increase its asset purchases to boost prices.

Eurostat said consumer prices in the 19 countries sharing the euro fell by 0.1 percent in the year to September, dipping below zero for the first time since March, and confirming its earlier estimate.

Compared to the previous month, prices were 0.2 percent higher in September.

Eurostat said milk, cheese and eggs were cheaper, while heating oil and motor fuel stripped almost a full percentage point from the annual rate. Restaurants and cafes, vegetables and tobacco had the biggest upward impact.

Excluding the most volatile components of unprocessed food and energy - what the European Central Bank calls core inflation - prices were 0.8 percent up year-on-year, slightly down from the previous reading of 0.9 percent. Month-on-month, they rose 0.4 percent.

Long term inflation expectations have dropped to their lowest since February, before the ECB's asset purchases started, as China's economic slowdown, the commodity rout and paltry euro zone lending growth reinforce pessimistic predictions.

Under its money-printing quantitative easing scheme, the ECB is buying government bonds and other assets to pump around 1 trillion euros ($1.1 trillion) into the economy, aiming to lift inflation towards its target rate of just under 2 percent.


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