Business World

Saturday 23 March 2019

Low inflation heaps pressure on ECB ahead of May meeting

Mario Draghi, president of the European Central Bank (ECB). Low inflation has increased pressure on the ECB.
Mario Draghi, president of the European Central Bank (ECB). Low inflation has increased pressure on the ECB.

Inflation in the eurozone rose less than economists forecast in April, keeping pressure on the European Central Bank to consider effectively printing money and other unusual steps to avert the risk of deflation.

The annual inflation rate increased to 0.7pc from 0.5pc in March, the European Union's statistics office in Luxembourg said yesterday. That was slightly below expect-ations and well below the ECB's target of 2pc.

Yesterday's inflation figures may prove critical for ECB President Mario Draghi, right, as he decides next week whether to embrace policies ranging from negative interest rates to quantitative easing. Mr Draghi said in Amsterdam last week that the Frankfurt-based central bank may start broad-based asset purchases if the inflation outlook worsens.

An inflation rate of 0.7pc "isn't exactly great," said Howard Archer, an economist at IHS Global Insight in London. It "may slightly ease concerns about deflation," he said. "The ECB doesn't see deflation as a substantial risk, but what they are concerned about is prolonged, very weak inflation, particularly below 1 percent."

Recent economic figures will give the ECB food for thought at its interest-rate meeting next week. Inflation in Germany missed estimates yesterday, and economic confidence unexpectedly fell in April. Eurozone unemployment probably remained at 11.9pc in March, just off a record, a separate Bloomberg survey shows. Ian Wishart

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