Inflation in the euro zone dropped to the lowest level since late 2009 in March, adding pressure on the European Central Bank
to launch new easing measures at its meeting on Thursday. Annual
inflation in the currency union dropped to 0.5%, down from 0.7% in
February, according to a preliminary estimate released on Monday. With
the 0.5% level, inflation remains far from the ECB's target of just
below 2%. Economists worry the euro zone may be heading for deflation,
which could put the fragile economic recovery at risk. "It is looking an
ever closer call on whether the ECB will take further measures, and it
is very possible that the bank could act as soon as its 3 April policy
meeting," said Howard Archer, chief U.K. and European economist at IHS
Global Insight. "However, the general impression we get from ECB
officials' comments is that the they don't believe circumstances warrant
policy action at this stage and we still think it is more likely than
not that the ECB will sit tight," he added. Data out on Friday showed
Spain has already slipped into deflation as high unemployment and weak
demand for goods among households and businesses have added pressure on
consumer prices. The euro jumped after the data on Monday, trading at
$1.3775, up from $1.3759 late Friday.
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