The annual rate of inflation in the 18 countries that use the
euro was unchanged at 0.4% in August, as the European Union's
statistics agency revised a previous estimate that recorded a
decline to 0.3%
However, the annual rate of inflation in the eurozone remained
at the lowest level since Oct 2009.
The latest figures released by Eurostat also showed that the
annual rate of inflation across the 28-member EU fell to its lowest
level since Oct. 2009 in July, and was unchanged in August, an
indication that very muted price rises threaten the economic
recovery beyond the borders of the eurozone.
The EU's statistics agency Wednesday said consumer prices in the
eurozone were 0.1% higher than in July, and 0.4% higher than in
August 2013. That revised the preliminary estimate for the annual
rate of inflation of 0.3% released late last month.
Eurostat also said the annual rate of inflation in the broader
EU--which includes 10 countries that don't use the euro--was
unchanged at 0.5% in August, having been revised lower to that
figure in July from a first estimate of 0.6%.
Eurostat's figures show that six eurozone members experienced
declines in prices in the 12 months through August, while two
members of the EU that don't use the euro shared the same
experience. But other members were on the cusp, with three eurozone
members recording inflation rates below 0.5%, as did five EU
members that don't use the common currency.
The slowdown in inflation is a mixed blessing. While it has
helped boost real incomes at a time of weak wage growth, it also
makes it more difficult for governments and households to cut their
high debt levels, a particular problem in southern Europe, where
unemployment is also very high.
More worryingly for policy makers, there is a risk that an
unanticipated economic setback could push some economies into
deflation--a sustained and self-reinforcing fall in prices--gjven
the very low levels of inflation.
Earlier this month, the ECB responded to inflation rates that
seem likely to remain well below its target of just below 2.0% by
cutting its key interest rates and announcing two new programs to
asset-backed securities and covered bonds.
However, the Organisation for Economic Cooperation and
Development Monday said that may not be enough to boost growth and
inflation, and called on the ECB to launch a program of large scale
asset purchases, including government bonds.
"Recent ECB action is welcome but further measures, including
quantitative easing, are warranted," said Rintaro Tamaki, the
OECD's acting chief economist.
Faced with similar problems, other European central banks also
seem likely to maintain easy monetary policies in coming months.
Sweden's Riksbank cut its benchmark interest rate in July, and
although it left policy unchanged earlier this month, also
indicated that rate won't be raised for about a year.
Poland's central bank has indicated it is likely to cut its
benchmark interest rate, possibly as soon as its next meeting in
October. The Czech National Bank has said it would extend its
weak-koruna policy well into 2016 to tackle low inflation, while
Hungary's central bank cut its key interest each month for two
years through July, and now intends to keep borrowing costs low for
a long time.
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