EU Inflation Continues At Low Levels ECB Under Pressure

Euro zone inflation stayed low as expected in what the European Central Bank calls the “danger zone” in June as falling prices of food and phone calls offset more expensive tobacco and restaurants, data showed on Thursday.

Consumer prices in the 18 countries using the euro rose 0.1 percent on the month in June for a 0.5 percent year-on-year gain — the same annual inflation rate as in May, data from the European Union’s statistics office Eurostat showed.

The annual rate is well below the ECB’s inflation target of close to, but below 2 percent. The central bank believes that price growth slower than 1 percent is a “danger zone” because of the risk of deflation. Price growth has been below 1 percent since last in October.

The ECB left interest rates unchanged in July, a month after cutting them to record lows and pushing the deposit rate into negative territory and it made clear it was ready to print money in the future if needed to prevent deflation.

Consumer prices fell in Greece, Portugal and Slovakia in June and 5 countries had inflation at or above 1 percent, including Germany where prices rose 1.0 percent on the year.

Core annual inflation – which excludes the volatile prices of energy and unprocessed food – stood at 0.8 percent in June, unchanged from May.

The ECB is also keeping an eye on the euro exchange rate and its impact on inflation — the bank is ready to launch additional measures to prevent deflation if the euro becomes to strong.

via Reuters

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