Eurozone Prices Drop as Deflation Sets In

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 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 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.

via BBC

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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