Eurozone officially experiencing deflation

World Today

The Eurozone’s inflation rate has officially turned negative, putting additional pressure on the economic bloc’s central bank to boost stimulus measures. CCTV’s Jack Barton reported this story from Brussels.

Eurozone officially experiencing deflation

The Eurozone’s inflation rate has officially turned negative, putting additional pressure on the economic bloc’s central bank to boost stimulus measures. CCTV’s Jack Barton reported this story from Brussels.

For months officials and many analysts said it wouldn’t happen, but the Eurozone is now officially experiencing deflation.

Prices in December fell by 0.2 percent compared to November. The drop was caused mainly by lower energy prices, which fell by more than 6 percent over the past 12 months.

It’s estimated food, alcohol and tobacco prices were unchanged on the previous year, while services had risen slightly, but nowhere near enough to compensate for the fall in energy prices driven largely by the plummeting cost of oil.

It’s the first time the Euro area has hit deflation since the peak of the global economic crisis in 2009, and many analysts are now predicting prices to drop again this month.

The price drop adds pressure on the European Central Bank to take even more aggressive stimulus action. The ECB’s inflation target is just below two percent and the bank had signaled its intention to begin a massive bond buying program later this month to boost inflation and the bloc’s stalled economic recovery.

But a snap election in Greece has thrown all of that into doubt as the bank will now be reluctant to buy Greek debt if the incoming government then pledges to default on it.

In a separate report, the E.U.’s statistics agency Eurostat also reported that unemployment remained unchanged at 11.5 percent in November.