Weak eurozone inflation data raises pressure on ECB

(FRANKFURT) - Inflation remains stubbornly low in several eurozone states, national data showed on Monday, keeping pressure on the ECB to unveil new steps to stoke the region's moribund economy this week.

Price rises in Germany, Europe's biggest economy, remained stuck at ultra-low levels for the third month in a row in September, according to preliminary data.

A flash estimate released by federal statistics office Destatis showed German inflation this month stood at just 0.8 percent year-on-year, unchanged since July. The last time it was lower was in February 2010.

In Belgium, prices decreased by 0.12 percent in September, the first time they have fallen since November 2009, according to government data.

In Spain, the fourth-largest economy in the eurozone, consumer prices fell for the third month in a row this month, down 0.3 percent on a yearly basis, according to provisonal figures.

Inflation has been unusually low across the 18-nation eurozone, fuelling concern the region could slip into deflation -- a sustained and widespread drop in prices that hampers economic activity and threatens jobs.

Analysts predict that bloc-wide data, due to be released on Tuesday, will show an annual inflation rate of 0.3 percent in September.

"Ultra-low headline inflation and the setback to growth will force the ECB to revise down its... projections for growth and inflation again in December," said Holger Schmieding at Berenberg.

The European Central Bank earlier this month took drastic measures to spur inflation, taking its refinancing rate down to 0.05 percent and its deposit rate further into negative territory, to minus 0.20 percent.

Financial markets are also hoping that president Mario Draghi will provide more details about the bank's contested liquidity programmes at its policy meeting on Thursday.

In the long run, analysts expect the eurozone's central lender to take more drastic measures to pump liquidity into the economy, and push inflation back toward the bank's annual target of just below 2.0 percent.

That could include a much wider programme of so-called quantitative easing (QE) or the purchase of unlimited amounts of bonds, a policy already practised by other central banks such as the US Federal Reserve and the Bank of England.

"The ECB will soon take the plunge into full-blown quantitative easing," Jennifer McKeown at Capital Economics predicted.

"But while QE now seems close to a done deal, we doubt that it will be announced in October."

While falling prices may sound good for consumers, deflation can trigger a vicious spiral where businesses and households delay purchases, throttling demand and causing companies to lay off workers.