Eurozone inflation falls to lowest since financial crisis

Eurozone inflation fell to 0.5 percent in March, official data showed on Monday, the lowest rate since October 2009 at the height of the financial crisis, and amid concerns about the dangers of deflation. Inflation in the currency bloc has trended steadily lower in recent months, coming in well below the European Central Bank target rate of just under 2.0 percent. The latest figure is sure to stoke concerns of a growing risk of deflation, or falling prices in absolute terms. By component, food, alcohol and tobacco prices rose 1.1 percent in March, after rising 1.5 percent in February, but energy costs were down 2.1 percent, after a fall of 2.3 percent in February, the Eurostat statistics agency said. Ben May, economist at Capital Economics, said the latest fall was partly due to temporary factors, but that "nonetheless, the weakness of inflation suggests that the ECB may have little option but to take further policy action." Deflation is a worry because if consumers believe prices will fall they put off purchases, which forces companies to delay investment, hitting salaries and jobs, and so setting up a vicious downward circle. The European Central Bank meets on Thursday for its monthly policy meeting and had not been expected to announce any new measures, given recent data suggesting the region's economy is in a tentative recovery. But for Christian Schulz, head economist at Berenberg Bank, "the after-effects of the euro crisis continue to drive down Eurozone inflation and maintain the pressure on the ECB to stimulate the economy." The ECB has held eurozone borrowing costs at their current all-time lows since November.