- Tomas Holinka, economist at Moody's Analytics
The Euro zone's inflation turned negative in February, boosting expectations that the European Central Bank will deploy additional stimulus measures at its next policy meeting on March 10. According to Eurostat, prices across the 19-nation currency bloc declined 0.2% in the year to February, following the 0.3% rise in the preceding month. The decline was largely due to a steep drop in energy costs, which plunged 8% in the twelve months to February after the previous month's decline of 5.4%. Moreover, the core rate, which excludes volatile items such as energy, food, alcohol and tobacco, was soft too, sliding to 0.1% from 1.0%. Falling oil prices, coupled with slowing economic growth in China and other emerging economies are weighing on the headline rate of inflation. Earlier this month, ECB President Mario Draghi insisted that the central bank's policies were working and the ECB stood ready to act if more efforts is needed.
Meanwhile, a separate report showed German retail sales rose in January from December, marking a strong start to the year. Retail sales increased 0.7% in the reported month, following an upwardly revised 0.6% rise in December, Destatis reported. Measured on an annual basis, retail sales, however, declined 0.8%.
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