|
 The slowdown to 0.4 percent, coming amid subdued wage pressures
despite a fall in unemployment to a near two-year low, will fuel
concerns of a possible broad fall in prices across the 18-nation
bloc.
But much of the decline in inflation was down to a sharp fall in
volatile energy prices, Thursday's data from EU statistics office
Eurostat showed, and the ECB is still waiting to assess the impact
of a batch of measures it presented in June to pep up a fragile
economic recovery.
"Today’s figures don’t give any assurance that the euro zone is
already out of the deflation danger zone," said Peter Vanden Houte,
chief euro zone economist at ING.
"Moreover, with the escalating conflict with Russia dampening growth
prospects, it seems unlikely that deflation fears will disappear any
time soon."
Consumer prices rose at their lowest annual rate since October 2009
when they fell by 0.1 percent, Eurostat data showed.
Core inflation - which excludes energy, food, tobacco and alcohol
costs - was unchanged at 0.8 percent for the second month in a row.
Energy prices fell 1.0 percent on the year.
NO CHANGE AT ECB
The ECB holds its next policy meeting next Thursday, and initial
reactions in the market - where assets were little changed - and
from analysts suggested the inflation numbers had not shifted
expectations that monetary policy will stay put.
"We believe that the ECB will sit tight through the rest of 2014,"
said Howard Archer, chief European economist at IHS.
ECB officials have said inflation expectations in the bloc remain in
line with the bank's target of just under 2 percent over the medium
term, even though the ECB sees inflation rising only slowly to 1.5
percent in the final quarter of 2016.
Analysts see limited risks of outright deflation in the euro zone,
amid expectations that energy prices may soon rise again and sharp
food price disinflation be draw to a close.
"We still expect the euro zone to avoid overall deflation," Archer
added.
ECB President Mario Draghi has said the central bank is ready to
take further unconventional measures if needed, and said that
quantitative easing - or money printing to buy assets - "falls
squarely in our mandate".
[to top of second column] |
But the barriers to embarking on such a round of broad asset
purchases are high, notably for some influential ECB policymakers
such as Bundesbank chief Jens Weidmann.
WAGE PRESSURE LIMITED
By country, Spain saw annual deflation of 0.3 percent in July, after
the economy roared ahead in the three months to June at its fastest
pace since before the financial crisis.
In Germany, inflation eased to 0.8 percent, days after the ECB and
the Bundesbank emphasized the need to raise wages in Europe's
largest economy.
Unemployment was unchanged in Germany in June, separate data from
Eurostat showed on Thursday. But in the euro zone as a whole it
dropped to 11.5 percent from 11.6 percent in May, the lowest rate
since September 2012.
Some 18.4 million people remain without a job in the single currency
bloc and much stronger economic growth, combined with necessary
structural reforms by the governments, is needed to kick-start a
solid build-up of new employment.
Among the rest of the bloc's five largest economies, unemployment
fell in Italy, Spain and the Netherlands and rose in France.
(Additional reporting by Paul Carrel in Frankfurt, editing by John
Stonestreet)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed.
 |
