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Eurozone inflation revised lower in August

16 September 2015, 11:36 CET
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Eurozone inflation revised lower in August

Photo © benjaminnolte - Fotolia

(BRUSSELS) - Inflation in the 19-country eurozone fell to 0.1 percent in August, revised data showed Wednesday, in a sign that a dangerous spell of falling prices could be returning to Europe.

The EU's Eurostat agency slashed its first estimate of 0.2 percent, with tumbling oil prices having the biggest effect on prices across the single currency bloc.

Earlier this month, European Central Bank (ECB) head Mario Draghi warned that inflation in the euro could turn negative in the coming months, even if only temporarily.

The eurozone suffered four months of deflation earlier this year, a situation that pushed the typically cautious ECB into action.

Fears of longer-term deflation -- a dangerous spiral of falling prices -- persuaded the ECB to launch in March a huge monetary stimulus programme, to get inflation closer to its 2.0 percent target.

Initially the scheme appeared to work, slowly pushing inflation back up in core eurozone economies such as France and Germany.

But this latest data will increase the prospect for even more stimulus by the ECB, which has downgraded its inflation forecasts for the coming years in the face of falling oil prices.

Economists fear a prolonged period of deflation in which consumers delay purchases, triggering even more falling prices, slowing economic activity and inviting recession.

Analyst Howard Archer of IHS Global Insight said the new data was "disappointing and worrying news for the ECB" that shows a "very real risk that the eurozone could see renewed mild deflation."

Annual inflation down to 0.1% in the euro area [Eurostat]


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