Eurozone inflation still a headache

A further slowdown in eurozone inflation in May was confirmed yesterday, as the cost of telecommunication and food kept prices low, confirming a problem that the European Central Bank recently sought to stem.
By The Newsroom
Published 16th Jun 2014, 21:56 BST

Consumer prices in 18 countries using the euro rose by 0.5 per cent on the year in May, keeping them in the ‘danger zone’ of below 1 per cent, the EU’s statistics office Eurostat data said.

Prices fell by 0.1 per cent on the month in May, with the cost of services down by 0.2 per cent when compared with April.

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It confirms a problematic pricing trend that weighs on debt-strapped countries and recently prompted the European Central Bank to act.

In June, the ECB became the first major central bank to introduce negative deposit rates – charging banks to park funds overnight. It also launched ultra-cheap four-year loans to banks in order to boost lending to companies.

ECB President Mario Draghi said he was ready to act again, leaving investors guessing as to when he could start buying assets such as bonds – a measure known as quantitative easing.

Executive Board member Benoit Coeure said there was no need to launch large-scale asset purchases for now because the eurozone is not seeing deflation.

There are, however, three eurozone countries experiencing price deflation.