"Is Europe heading toward deflation? March euro-zone inflation data released Mondaycertainly suggest the European Central Bank ought to worry about Japan-style deflation. Investors will be looking for a response at Thursday’s ECB policy meeting. But Japan’s Abenomics might not be the answer either, to judge by some disappointing industrial production numbers for February. What’s more, the ECB’s policy makers might well point to data showing economic revival across the single-currency region–like Germany’s very strong retail sales data–as a reason to hold the ship steady, hoping that the drop in inflation is just a temporary phenomenon.
Source: WSJ
March preliminary consumer price index rose 0.5% on the year against expectations of a 0.6% increase and from a 0.7% rise in February.
Euro zone consumer prices rose at their slowest annual pace in March since November 2009 and well below the European Central Bank’s target of just under 2%. The downward trajectory in inflation is a worry, raising concerns that deflation is about to take hold. The ECB’s policy meeting on Thursday will be watched closely for signs of fresh policy response".
Source: WSJ
