In December, inflation in the Eurozone fell into negative territory both on a monthly (-0,1%) and yearly (-0,2%) basis. In November the data had been respectively -0,2 and +0,3%. This was announced this morning by Eurostat, confirming the preliminary estimate released last week and specifying that "core" inflation, the one that excludes the most volatile components, was instead revised downwards from +0,8% to +0,7 %.
Meanwhile, the German Federal Statistical Office reiterated that inflation rose in Germany by 0,2% month on month in December, the lowest level since October 2009. On an annual basis, however, the change was zero .
The weakness in prices fuels expectations for the ECB Governing Council meeting on 22 January, which should launch quantitative easing, ie a generalized purchase program by the Eurotower on public and private securities. Just today, the French economist Benoit Coeurè, member of the board of the Central Bank, confirmed that the institute will evaluate the purchase of government bonds of the countries of the area.
On the other hand, last 7 January the European Commission specified that a "temporarily negative" inflation figure in the euro area "must be distinguished from deflation". In fact, this term refers to a large and generalized drop in prices that feeds on itself: consumers postpone their purchases, trusting in further reductions, while producers, given the drop in demand, are actually forced to lower their prices further . This is a depressive economic spiral that is particularly difficult to reverse.
“We continue to believe that the declines in raw materials will continue to weigh, but then with the economic recovery the index should recover – said Annika Breidthardt, Commission spokeswoman -. In the short term, low inflation will continue, but then it will pick up again”. The ideal rate according to the statute of the ECB, which has price stability as its first mandate, is lower but close to 2%.
