Eurozone's core inflation rate unexpectedly rose, but dangers still remain.
The region's inflation rate has been confirmed at minus 0.3 per cent in February, up from the low of -0.6 per cent touched in January but still dangerously low as the European Central Bank battles the threat of deflation.
On Tuesday Eurostat said consumer prices in the 28-nation bloc fell 0.2% in February from a year earlier, and confirmed data that showed prices in the eurozone were 0.3% lower. In January, prices fell by 0.5% in the EU as a whole, and by 0.6% in the eurozone.
This month the central bank began its €60bn a month bond buying programme to repel the spectre of deflation in the eurozone, and economic data has for the most part surprised positive this year, says The Financial Times.
Inflation has been hit by diving oil prices, and the "core" rate - which strips out energy - was actually revised up to 0.7 per cent in February, from the initial 0.6 per cent reading.
As the inflation rate remains in negative
territory, there is a danger that companies and households begin to
expect prices to continue to fall, and starting a "deflationary mindset"
that has proved hard to dispel in Japan.
In order to ease the risk of deflation, central bankers are providing more
stimulus, adopting a range of unconventional measures in an effort to
boost prices.
The ECB on March 9 embarked on a program known as quantitative easing under which it will buy more than one trillion euros of mostly government bonds by September 2016. On March 4, Poland's central bank slashed its main interest rate by 50 basis points to 1.50%, the lowest on record, in response to persistent declines in consumer prices. The central banks of Sweden and Denmark have also eased policy this year, says MarketWatch.
