Tags: EU | EU | Economy

Euro Zone Inflation Slid to 0.9 Percent in February

Tuesday, 02 Mar 2010 09:51 AM

Inflation in the 16 countries that use the euro fell in February, official figures showed Tuesday, in a further sign that price pressures remain subdued in the wake of the recession.

Eurostat, the EU's statistics office, said that euro zone prices are estimated to have risen by 0.9 percent in February from the year before. That rate is down from the 11-month high of 1 percent recorded in January.

The decline was unexpected — the consensus in the markets was for inflation to hold steady at 1 percent.

No further details were provided, but more information will come when Eurostat publishes its full release on March 16.

Nevertheless, the figures give further evidence that inflationary pressures remain constrained by a near 10 percent unemployment rate and subdued money growth.

This view was further underlined by another release from Eurostat showing that prices at the factory gate fell by 1 percent in January from the year before.

The figures are also likely to reinforce market expectations that the European Central Bank will not be raising its benchmark interest rate from the current record low of 1 percent anytime soon. The bank is tasked with keeping inflation at or just below 2 percent.

"In all, then, we still expect headline inflation to ease back towards zero over the remainder of the year, suggesting that it will be a long while yet before the ECB begins thinking about raising interest rates," said Ben May, European economist at Capital Economics.

Though an interest rate increase is not thought to be imminent, the central bank's president Jean-Claude Trichet is expected to announce on Thursday, at the conclusion of the latest monetary policy meeting, that special liquidity measures introduced to prop up the banking system during the financial crisis and the recession will continue to be wound down.

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Inflation in the 16 countries that use the euro fell in February, official figures showed Tuesday, in a further sign that price pressures remain subdued in the wake of the recession.Eurostat, the EU's statistics office, said that euro zone prices are estimated to have risen...
EU,EU,Economy
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2010-51-02
Tuesday, 02 Mar 2010 09:51 AM
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