European Central Bank under pressure to slash rates on deflation fears
Inflation across the single currency bloc fell to 0.7% in January moving closer to deflationary territory
Friday 31 January 2014
European Central Bank president Mario Draghi came under pressure to cut rates again today as the eurozone slipped closer towards dangerous deflation territory.
Falling energy prices pushed inflation across the single currency bloc to 0.7 per cent in January — less than half the ECB’s target of just below 2 per cent, and disappointing hopes of a slight rise in the rate to 0.9 per cent.
The last time inflation fell as low Draghi responded by cutting rates to an all-time low of 0.25 per cent. He also strengthened the ECB’s forward guidance earlier this month, saying the central bank would act again if medium-term inflation prospects worsened.
Unemployment across the eurozone meanwhile remains high at 12 per cent or 19.1 million.
ING Bank economist Martin van Vliet said: “Further monetary easing on the back of a renewed downgrade in the inflation outlook can certainly not be ruled out.”
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