Official figures have confirmed that the annual rate of inflation in the euro zone was negative in June for the first time on record.
The EU's Eurostat agency said that 12-month inflation in the euro zone fell 0.1%, the lowest rate on records going back to 1996 and down from 0% in May, confirming an estimate from June 30.
After hitting a record high point of 4% in June and July 2008, euro zone inflation has fallen sharply as oil and other commodity prices have collapsed in the face of the economic downturn.
Most economists had expected that euro zone inflation would dip briefly into negative territory but have ruled out a longer Japanese-like bout of deflation, a pernicious downward spiral in prices. Deflation, or a run of falling prices, can wreak havoc on the broader economy as households put off purchases in hope of getting a better bargain in the future. This can cause a downwards spiral of prices, production, unemployment and further deflation.
