Euro zone inflation unexpectedly slowed in February

Euro-area inflation unexpectedly slowed in February, keeping pressure on the European Central Bank to defend the currency bloc against falling prices.

Consumer prices rose an annual 0.7 per cent, down from 0.8 per cent in January, the European Union’s statistics office in Luxembourg said today.

That’s below Eurostat’s initial estimate of 0.8 per cent on February 28.

The rate has been below 1 per cent for five months. Today’s report is “a clear reminder that low inflation may have become the new normal for the euro zone,” said Martin van Vliet, an economist at ING Bank in Amsterdam.

The February revision “is unlikely to be enough to trigger further near-term monetary easing, he said.

“This will also require a deterioration of activity and/or a further significant strengthening of the euro.’’

The ECB aims to keep inflation just below 2 per cent and has blamed the strength of the euro for helping to keep prices subdued.

The central bank expects its key interest rates ‘’to remain at present or lower levels for an extended period of time,’’

President Mario Draghi said on March 6 after the Governing Council left the main refinancing rate at a record low of 0.25 per cent.

“This expectation is based on an overall subdued outlook for inflation extending into the medium term, given the broad- based weakness of the economy, the high degree of unutilized capacity and subdued money and credit creation,’’ Mr Draghi said.

Bloomberg