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Eurozone Inflation Stabilizes at 0.8 Percent

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Eurozone Inflation Stabilizes at 0.8 Percent

Consumer inflation in the Eurozone stabilized last month, easing pressure on the European Central Bank to carve out an immediate response to deflation.

Eurozone consumer inflation stabilized at 0.8 percent annually in January, according to a revised estimate from the European Commission. The reading was revised upward from an initial flash estimate of 0.7 percent released on January 31. The so-called core measure, which excludes volatile goods such as food, energy, alcohol and tobacco, rose 0.8 percent annually.

The revised estimate, which is based on more detailed data, showed inflation fell in January at its fastest ever pace, thanks to declining non-energy industrial goods. Inflation in the 18 nations sharing the euro dropped 1.1 percent in January when compared with the previous month. Non-energy industrial goods tumbled 3.9 percent in January, official data showed.

The ECB, faced with the threat of deflation, cut its benchmark interest rate to 0.25 percent in November, a record low. Interest rates are expected to remain at that level until mid-2015. Although the ECB has repeatedly stated it does not expect deflation to persist, the markets remain on high alert. ECB President Mario Draghi announced earlier this month the central bank would wait for more information about economic recovery to determine the next stage of monetary policy.

An initial estimate of economists in a Reuters poll forecast consumer inflation to rise to 0.9 percent in January, a rate that is still well below the ECB’s target of around 2 percent. A recent survey administered by the ECB showed professional forecasters expect inflation to remain relatively subdued over the next several years, as Eurozone recovery continues to deepen.

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