Eurozone inflation revised down, bolstering stimulus case

LONDON – Inflation across the 19-country eurozone was lower than previously thought in January, official figures showed Thursday, in a development that’s likely to further strengthen expectations that the European Central Bank will back more stimulus next month.

Eurostat, the European Union’s statistics agency said the annual rate of inflation in January was 0.3 per cent, against its previous estimate of 0.4 per cent. The revision was not anticipated in the markets and comes ahead of Monday’s first estimate for February. The figure could go a long way to determining what the ECB does at its next policy meeting March 10.

The ECB is in the midst of a massive stimulus program that is designed to get inflation back toward its target of just below 2 per cent. By keeping interest rates low and pumping money into the economy via a bond-buying program worth over a trillion euros, the ECB is hoping to generate enough economic activity to get prices rising. ECB President Mario Draghi has repeatedly hinted that the central bank is ready to consider more support for the economy.

Inflation has been below target since February 2013 for a variety of reasons, not least the fall in oil prices. The consensus in markets is that the rate will drop to 0.1 per cent in February because of renewed weakness in oil prices, which analysts say will seal the deal on further stimulus.

“Caution is very much the watchword for Draghi and co. at present,” said Dennis de Jong, managing director of

Underlying price pressures in the eurozone are very soft. Even after stripping out the volatile items of energy, food, alcohol and tobacco, the eurozone’s core inflation rate remains below target at 1 per cent.

On an individual basis, six of the eurozone’s countries — Cyprus, Greece, Latvia, Slovenia, Slovakia and Spain — are currently recording inflation rates below zero.