Euro zone inflation falls 0.5 in March; deflation worries revived

Nathan Andrada – Fourth Estate Cooperative Contributor

Brussels, Belgium (4E) – Prices in the euro area dropped to 0.5 percent in March, compared with 0.7 percent in February and its lowest level since November 2009, according to data from Eurostat released Monday.

The statistics agency’s figure puts the inflation rate way below the 2 percent target by the European Central Bank (ECB). The estimate is also below analysts’ estimate of 0.6 percent.

The lower-than-anticipated inflation may add to concerns that the 18-nation common currency bloc risks a period of deflation. Eurostat’s estimate for March is a “flash” or preliminary estimate, which means it could be revised later.

It is the sixth straight month that inflation has fallen below 1 percent, and analysts believe that the ECB could take action on Thursday due to the sharp drop in the inflation rate.

Earlier in March, the central bank kept rates steady at 0.25 percent during its last meeting and made no new action to help boost the euro zone’s fragile recovery.

At that time, ECB president Mario Draghi said the central bank could take action if the outlook for the region deteriorates. Analysts have urged the ECB could lower interest rates even further or purchase bonds in the same manner to the U.S. Federal Reserve.

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