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Eurozone inflation down, interest rate cut to follow?


economy

Eurozone inflation down, interest rate cut to follow?

Inflation in the eurozone fell to 2.0 percent in January, down from 2.2 percent in December.

It is an indication of the reluctance by Europeans to spend money as the eurozone struggles through recession

During the month, the biggest rises in consumer prices were in food and energy.

The figures from Eurostat give the European Central Bank room to consider a cut in interest rates in order to help stimulate the region’s recovery when its policymakers meet next week.

The ECB’s inflation target is below, but close to, 2.0 percent.

The Bank’s Governing Council meets on March 7 and economists are divided over whether the bank will cut rates to below the current 0.75 percent.

The European Commission’s forecast last week that the eurozone will remain in recession this year could make a cut more likely.

“We think recent developments are enough to prompt a policy response,” JP Morgan said in a report. “A cut in the main refinancing rate is not the most powerful measure the ECB could implement, but it is a step in the right direction.”

Inflation pressures seem to have subsided, and the Commission, the 27-nation bloc’s executive, forecast the eurozone’s yearly inflation at 1.8 percent in 2013.

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