EC Says Eurozone Deflation Risks Are Low

May 5, 2014 Share Print 0

The risk of deflation in the euro zone is low, the European Union’s executive arm said on Monday, despite warning that inflation is expected to slow this year.

In its Spring Economic Forecast, the European Commission said inflation in the 18-member bloc would fall to 0.8 percent in 2014 from 1.3 percent last year.

It added that inflation was expected to pick up in 2015 to 1.2 percent – but this remains well below the European Central Bank’s (ECB) target of close to 2 percent.

“The risk of outright deflation, defined as a generalized and self-reinforcing fall in prices in the euro area as a whole, remains low,” the Commission said.

“For such a scenario to materialize, inflation would have to drop sharply to almost zero in the core countries of the euro area. Shocks that would trigger such a drop in core inflation are very unlikely.”

It comes amid wide-spread fears of deflationary pressures in the euro zone, with a number of analysts calling on the ECB to use policy tools such as quantitative easing to combat persistently low inflation.

via CNBC

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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.