31 Mar, 2016

Eurozone in deflation

31 Mar, 2016

Quantitative easing programme to the rescue?

Consumer prices in the eurozone fell for the second month running in March thanks again to falling energy prices.

Prices were 0.1% lower than a year ago.

The figure was a small improvement on February, when deflation was running at 0.2%, but it maintains pressure on the European Central Bank (ECB) to act further to boost prices.

Deflation can be damaging for economies, particularly if consumers put off buying products in the belief that prices will fall further.

The official figures, from the Eurostat agency, showed energy prices were 8.7% down on a year ago.


The ECB is charged with keeping inflation close to, but below, 2%.

Core inflation, which excludes energy prices, was running at 0.9% in March, slightly above February’s 0.8%, but still well below the ECB’s target rate.

Earlier this month the central bank increased its effort to boost economies of the eurozone.

The ECB cut its main interest rate from 0.05% to 0% and cut its bank deposit rate, from minus 0.3% to minus 0.4%.

The bank also expanded its quantitative easing programme from €60bn to €80bn a month.

It hopes those moves will encourage banks to lend.