-Commerzbank
Brace yourself. Fresh actions from the ECB are coming. Back in November, when inflation hit 0.7% the central bank cut its key refinancing rate to a fresh record-low of 0.25%. With inflation at the lowest level in four years markets are preparing for a radical measure that will most likely to be introduced this Thursday.
A report from the Eurostat showed consumer prices stood at 0.5% last month, down from 0.7% in February and hitting the lowest level since November 2009. Moreover, it is 0.1% lower than the value expected by markets. Core inflation, which is considered as a less volatile measure, also eased in March, reaching 0.8% following a 1.0% gain in the preceding month. That puts the inflation well below the official target of 2% and marks the sixth straight month when the rate hovered below 1%. The figure intensifies concerns about deflation risks in the 18-nation bloc, that can drag the region into another recession. Nevertheless, this is just a flash estimate, meaning it can be revised later.
While the latest figures raise fears about Japan-style deflation nightmares that were affecting the economy for decades, analysts expect a rebound in April, hence, even despite alarming reading the ECB may postpone its decision until the next month's meeting, and only claim its readiness to act if necessary.
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