- Frederic Pretet, inflation strategist at Scotiabank
With already three countries with negative inflation and subdued inflationary pressure in the whole region, the ECB is facing a serious need to consider adding fresh stimulus in order to eliminate all the risks of deflation. Earlier this month the IMF said there is a 15-20% risk that long period of inflation below the official level will de-anchor the expected anticipation by the Eurozone's consumers about the longer-term inflation. At the same time, vast majority of economists believe this risk is equal to 15%. A poll conducted by Bloomberg showed that 27 our of 45 of analysts believe the ECB should take further steps to support the growth.
The pace of growth in consumer prices in Slovakia slowed to -0.1% in February, staying in the negative territory for the second straight month. In contrast, inflation in Europe's largest economies picked up. Consumer prices in France advanced 0.9% in February, accelerating from 0.7% a month earlier. The data, however, missed analysts' forecasts for a 1.0% growth. On a monthly basis, the CPI rose 0.6%, recovering from a 0.6% drop in the prior month. While the latest fundamental data points at a sluggish growth, stronger inflation eliminate some of the early concerns. Previous reports showed industrial output missed market's forecasts, while French services sector remained in the contraction zone for the fourth straight month.
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