Euro zone inflation drops back to rate-cut level

Tuesday 18 March 2014 18.30
Euro zone inflation stood at 0.7% i n February
Euro zone inflation stood at 0.7% i n February

Euro zone annual inflation dropped back in February to the level that triggered a surprise cut in interest rates in November, revised data shows, underlining deflation risks in the bloc.
              
The year-on-year inflation rate in the euro zone was 0.7% in February compared to 0.8% in January, the European Union's statistics office Eurostat said.
              
The reading was the joint-lowest in four years and just below the initial February estimate of 0.8%.

The annual inflation rate last fell to 0.7% in October - a decline that persuaded the European Central Bank to cut its key interest rate to a record low of 0.25% the following month.

Inflation has not dropped below that level since November 2009, when it stood at 0.5%, Eurostat said.
              
The ECB, which targets inflation at close to but below 2%, considers the risk of euro zone deflation as "quite limited", its president Mario Draghi said last Thursday. The bank left borrowing costs unchanged at its most recent meetingon March 6.
              
 

Draghi also said the bank has been preparing additional policy steps to guard against possible deflation, and that the longer inflation remained low, the higher was the probability of deflationary risks emerging.