Eurozone inflation rate drops below 0 as energy costs slide

Inflation across the 19-country eurozone turned negative in February, official figures showed today, in a development that will boost expectations that the European Central Bank will unveil another stimulus package at its next policy meeting on March 10.
Statistics agency Eurostat said consumer prices across the region were down 0.2 per cent in February from the year before, against a 0.3 per cent rise the previous month.
The decline was way more than anticipated -- the consensus in the markets was for a drop to zero.
The decline is largely due to a big decrease in energy costs, which were 8 per cent lower in the year to February against the previous month's 5.4 per cent drop.

However, the core rate, which strips out the volatile items of energy, food, alcohol and tobacco, was weak too, falling to 0.7 per cent from 1 per cent. That shows how weak price pressures from such things as higher wages are in the eurozone economy.
Since the ECB aims for inflation just below 2 percent, February's negative rate could mean it cuts interest rates further or expands its bond-buying programme -- inflation has been below target since February 2013.

"Poorly anchored inflation expectations and the cooling economy will prompt the ECB to ease already-accommodative monetary policy," said Tomas Holinka, economist at Moody's Analytics.

The great concern is that inflation will fall further over the coming months because of the continued weakness in oil prices and a murkier global economic outlook, largely fueled by unease over the economic slowdown in China.
The eurozone experienced a bout of falling prices about a year ago but it didn't last long, helped in part by ECB stimulus measures and a falling euro, which made the price of imports dearer.