- Centre for Economics and Business Research
While inflation in the Euro zone slid into contraction on an annual basis, inflationary pressures rose across the region month-on-month in February. According to Eurostat, consumer prices in the 19-nation currency bloc declined 0.2% on a yearly and seasonally adjusted basis last month, compared with the 0.3% growth reported in January. Meanwhile, that the core rate, which strips out energy, food, alcohol and tobacco, was 0.8% in the year to February, up from the initial estimate of 0.7%. On a monthly basis, the consumer inflation edged up 0.2%, a significant pickup following a massive 1.4% decline in January and zero growth in December.
The European Central Bank remains concerned that low or negative inflation would force consumers to put off spending, while business may opt against investing, thereby hurting the region's fragile recovery. Therefore, the negative inflation rate was the main reason behind the central bank's decision to enlarge its stimulus measures for the Euro zone economy. The ECB hopes that the package will boost economic activity, underpinning inflation. Moreover, the central bank will be hoping that with oil prices having recently rebounded from multi-year lows inflation will start to pick up in the coming months.
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