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Eurozone inflation inches up, still negative in March

01 April 2016, 20:03 CET

(BRUSSELS) - Eurozone consumer prices continued to fall in March at only a slightly slower pace than in February, data showed Thursday, despite the European Central Bank boosting its already massive stimulus programme to beat deflation.

Economists fear falling prices because if consumers delay purchases to buy cheaper at a later date, it undercuts demand, then investment and jobs in a vicious circle.

The Eurostat statistics agency said the inflation rate in March was a negative 0.1 percent, compared with minus 0.2 percent in February while in January, prices rose 0.3 percent.

Falling energy prices again were the major factor, down 8.7 percent in March after a fall of 8.1 percent in February.

Earlier this month, the ECB added to its already unprecedented stimulus programme by slashing record-low interest rates and promising to pump even more money into the banking system in an effort to get the banks to lend freely again.

Analysts had expected inflation to come in at a negative 0.1 percent but were still disappointed at the "very weak" outcome in March.

Jonathan Loynes at Capital Economics said the "figures confirm that price pressures in the single currency union remain very weak."

Loynes said country data suggested that traditional price increases before the Easter holidays "could be reversed in April."

"Looking ahead, eurozone inflation is likely to remain close to zero in the next few months before edging higher in the second half of the year as negative energy effects finally fade," he said in a note.

"But it looks set to remain well below the ECB's target of close to 2.0 percent, maintaining pressure on the central bank for yet more policy support."

Euro area annual inflation up to -0.1% - (Eurostat)

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