Eurozone Finally Finds Itself Free of Deflation
February 22 2017 - 5:33AM
Dow Jones News
By Paul Hannon
For the first time in almost four years, none of the eurozone's
19 members was in deflation during January, an encouragement to the
European Central Bank in its long struggle to lift inflation to its
target and keep it there.
The European Union's statistics agency Wednesday confirmed an
earlier estimate that showed consumer prices in the currency area
were 1.8% higher than a year earlier, a jump from the 1.1%
inflation rate recorded in December 2016 and within touching
distance of the ECB's target, which is close to, but below 2%.
Eurostat also recorded that consumer prices were higher on the
year in all of the eurozone's members, the first time that had
happened since February 2013. Ireland, the last member to have been
in deflation, saw prices rise by 0.2%, having experienced a fall of
the same magnitude in December.
As recently as May 2016, consumer prices were down on the year
in the eurozone as a whole. Since then, a recovery in energy prices
has driven inflation steadily higher, bringing an increasing number
of countries out of deflation.
ECB policy makers have been celebrating the waning of a threat
that spurred them to launch the first in a series of stimulus
measures in June 2014. Central bankers fear deflation, because once
it takes hold and becomes self-sustaining, it is difficult to
escape from, as Japan's experience has shown.
While all of the eurozone's members are now experiencing
inflation, there remain wide divergences across the currency area.
In January, the highest rate of inflation was the 3.1% recorded in
Belgium, with Spain close at 2.9%. Spanish prices were falling as
recently as last August.
In inflation-averse Germany, prices were 1.9% higher than a year
earlier in January, amplifying calls for an end to ECB stimulus.
The central bank has said it won't consider a tapering of its
stimulus programs until it is clear that inflation will remain at
its target even after energy prices have stopped rising.
That would requires a pickup in the pace at which prices of
other goods and services are rising, but there were few if any
signs of a buildup in underlying inflationary pressures during
January. The core rate of inflation--which excludes energy, food,
alcohol and tobacco-was unchanged at 0.9%, and lower than in
January 2016.
Write to Paul Hannon at paul.hannon@wsj.com
Write to Paul Hannon at paul.hannon@wsj.com
(END) Dow Jones Newswires
February 22, 2017 05:18 ET (10:18 GMT)
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