Eurozone Inflation Remains Stubbornly Low

Inflation in the 18-nation eurozone has fallen to a near five-year low, stoking fears over deflation. The data put pressure on the European Central Bank (ECB) to act.

Consumer prices rose at a meager 0.3 percent in September, according to Eurostat, which cited lower energy costs as a big factor in the drop. In August, prices rose by 0.4 percent.



In Germany, Europe's biggest economy, inflation stalled at 0.8 percent, in Spain, prices fell for the third month in a row, at a rate of 0.3 percent, and in Belgium, prices fell by 0.12 percent - the first time since November 2009.



Inflation has been unusually low across the eurozone, coming in far below the ECB's target of 2 percent for several months now.



"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," Holger Schmieding from Berenberg Bank told the Reuters news agency.



Last month, the ECB lowered its key interest rate to 0.05 percent to counteract low inflation and weak growth. Unlike the US Federal Reserve and the Bank of England, it has so far shied away from quantitative easing (QE), but some economists believe it can no longer hold off on the practice, which involves buying up an unlimited number of bonds.



The ECB meets again on Thursday, where its president, Mario Draghi, is expected to give more details about its liquidity program.



Deflation may sound good to consumers, who initially enjoy lower prices, but it means businesses and consumers put off purchases in the hope of even lower prices, eventually leading to lower growth and higher unemployment.



ng/hg (Reuters, dpa, AFP)