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Deflation hits eurozone as energy prices fall | |
(30 minutes later) | |
Inflation in the eurozone has turned negative, official figures have shown, with prices in December 0.2% lower than the same month a year earlier. | Inflation in the eurozone has turned negative, official figures have shown, with prices in December 0.2% lower than the same month a year earlier. |
The tip into deflation adds pressure on the European Central Bank (ECB) to take further action to stimulate the bloc's economy. | |
The bank's inflation target is below but close to 2%. | The bank's inflation target is below but close to 2%. |
The fall was driven mainly by lower energy costs due to the plunging price of oil. | |
Energy prices in December were 6.3% lower than a year earlier. If energy prices are excluded, December's inflation rate for the eurozone was 0.6%, the same as in November. | |
Prices for food, alcohol and tobacco were estimated to be unchanged from a year earlier, after rising 0.5% in November. | Prices for food, alcohol and tobacco were estimated to be unchanged from a year earlier, after rising 0.5% in November. |
Prices for services, which had held steady in November, are estimated to have risen 1.2% compared with December 2013. | Prices for services, which had held steady in November, are estimated to have risen 1.2% compared with December 2013. |
It is the first time the eurozone has experienced deflation since the depths of the financial crisis in 2009. | It is the first time the eurozone has experienced deflation since the depths of the financial crisis in 2009. |
The estimate from Eurostat, the statistical office of the European Union, will be updated later in the month. | The estimate from Eurostat, the statistical office of the European Union, will be updated later in the month. |
'Policy failure' | |
Howard Archer, chief European economist at IHS Global Insight called the inflation data "dire news for the ECB". | |
The central bank is increasingly expected to launch a new round of economic stimulus measures, or quantitative easing (QE), and the latest numbers will cement expectations. However, Germany reportedly opposes more QE. | |
James Ashley, chief European economist at Capital Economics, said Wednesday's data was a footnote to the wider economic picture. | |
Arguments over whether inflation was just above or below 0%, and whether the tumbling oil was to blame, were "specious," he said. | |
"The far more important question is why inflation is anywhere near 0% in the first place: in our view, the inconvenient truth for policymakers is that, in large part, that is a reflection of the failure of policy, both fiscal and monetary." | |
Separately, Eurostat reported that the unemployment rate in the eurozone remained at 11.5% in November, unchanged from October. |