Eurozone annual inflation is expected to be 0.5%
in March 2014, down from 0.7% in February, according to a flash estimate today
from Eurostat, the statistics office of the European Union.
Looking at the main components of Eurozone
inflation, services is expected to have the highest annual rate in March (1.1%,
compared with 1.3% in February), followed by food, alcohol & tobacco (1.0%,
compared with 1.5% in February), non-energy industrial goods (0.3%,
compared with 0.4% in February) and energy (-2.1%, compared with -2.3% in
The official ECB inflation target is "below but
close to 2%" and last week, the cost of borrowing for peripheral economies
plunged amid expectations that the European Central Bank will be forced to start
buying government bonds to head off deflation fears.
Yields on 10-year Portuguese government bonds,
which move opposite to prices, fell below 4% for the first time since
early 2010 on Friday while Spanish 10-year yields dropped to a near decade-low
of 3.24% as inflation in March was forecast to have fallen by 0.2%.
Luis Linde, the
governor of the Bank of Spain, in a speech
warned that the risk of deflation was “not zero”.
He added: “If you ask me whether there is a high
probability [of deflation], I would say no. But even if the probability is low,
the ECB should take measures to anticipate this, with a stronger monetary
relaxation. Interest rates are low now, but they could be lower still.”
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