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Eurozone inflation falls sharply into negative territory

Monday, February 29, 2016 - 18:50

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Eurozone inflation in February fell sharply to negative 0.2 per cent, data showed on Monday, in the clearest sign yet that several rounds of stimulus measures by the European Central Bank are not working.

[BRUSSELS] Eurozone inflation in February fell sharply to negative 0.2 per cent, data showed on Monday, in the clearest sign yet that several rounds of stimulus measures by the European Central Bank are not working.

The figure is a huge drop from the revised positive 0.3 per cent in January, and heaps ever more pressure on the ECB to come up with new ways to revive the European economy and boost inflation.

The data from the EU's Eurostat statistics agency came in well below analysts' forecast of zero per cent inflation for the period, which is already much lower than the ECB's official two-per cent target.

Falling oil prices and slowing economic growth in China and other emerging economies are weighing on the headline rate of inflation in the 19-country area that uses the European single currency.

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Eurostat said energy prices in February fell by 8.0 per cent, after a far slower decline of 5.4 per cent a month before.

The sharp nosedive puts the eurozone into negative territory for the first time since September and dashes hopes that unprecedented efforts to boost prices by the ECB were slowly having an effect in Europe.

"The ECB will be most worried as eurozone core inflation narrows to 0.7 per cent in February from 1.0 per cent in January," said IHS Economist Howard Archer, referring to the closely watched inflation measure that strips out energy and other volatile prices.

"(This) ramps up pressure for major March stimulus," he said.

The ECB has rolled out a range of different policy measures to help get the eurozone economy back on its feet, most recently a controversial programme of bond purchases known as quantitative easing or QE.

ECB chief Mario Draghi insisted earlier this month the policies were working.

AFP

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