-Yves Mersch, ECB Executive Board member
Euro zone retail sales declined in February following four consecutive monthly rises, a sign that the boost to the spending power of households from falling oil prices may be fading away. Eurostat reported that retail sales in 19 countries sharing the single currency slid 0.2% on a monthly basis translating into a 3.0% annual gain. Retail sales are a bellwether for consumer demand, an important component of Euro zone's economic output, which is predicted to grow 0.3% on quarter in the first three months of 2015, up from 0.2% in the December quarter of 2014. The precipitous plunge in energy prices in the final months of last year left Euro zone consumers with more money to spend on other goods and services, underpinning households' confidence and spending. Yet, as oil prices have steadied in recent months, that boost has waned. Weak consumer demand will make it more challenging for companies to raise their prices, and the ECB does not predict the inflation rate to return to its official goal of just under 2% until 2017.
In the meantime, Luis Linde, ECB Governing Council member said that the central bank's massive QE programme has already borne fruit, while Yves Mersch hinted that the ECB may reduce its asset purchases in case inflation rises faster than anticipated. Mersch also argued that the central bank's massive easing scheme was deployed at the right time halting a free-fall in inflation.
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