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Eurozone Inflation in Focus

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Eurozone Inflation in Focus

The European Commission’s monthly report on Eurozone consumer inflation will be released Wednesday. The event is very likely to move the financial markets, which are looking to determine whether the European Central Bank will put speculation to action and shore up deflation.

The Commission is expected to show Eurozone inflation rose 0.8 percent annually in April, following a reading of 0.5 percent the previous month that was also the lowest in 4 years. The ECB, which targets inflation at just below 2 percent, left interest rates at 0.25 percent last month.

The Federal Statistics Office reported today that German consumer inflation rose 1.3 percent annually in April, slightly below forecasts. Germany’s harmonized CPI reading was 1.1 percent, official data showed.

Stubbornly low inflation has created fresh headaches for ECB policymakers, who are faced with a difficult decision of how to shore up declining consumer prices. April is expected to mark the seventh consecutive month consumer inflation was below 1 percent, a sign policymakers may be forced to act immediately.

Deflationary pressures forced the ECB to slash interest rates to 0.25 percent in November. With inflation trending at less than half of the central bank’s target, Federal Reserve-style quantitative easing and negative deposit rates are reportedly under consideration.

On the data front, Germany will report on retail sales and unemployment Wednesday. German retail sales rose 1.6 percent annually in March, while the unemployment rate held steady at 6.7 percent in April, according to forecasts.

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