Euro Zone Inflation Could Trigger Japan Style Deflation

As inflation in the euro zone languishes at its lowest level in four years, some analysts argue that the region is at risk of a Japan-style deflationary rut.
In October, the euro zone’s inflation reading came in at 0.7 percent on year, down from September’s 1.1 percent and a four-year low. Core consumer prices in Japan, which include oil but strip out volatile food prices, rose 0.7 percent in year to September with a broader measure rising 1.1 percent.

Japan, the world’s third biggest economy, has been plagued by deflation for almost two decades and inflation has only recently started to edge higher following aggressive monetary stimulus from the Bank of Japan.

Worries over low inflation levels prompted the European Central Bank to cut its benchmark interest rate by 25 basis points on Thursday.

via Is the euro zone at risk of Japan style deflation?

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza