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Latest eurozone price weakening fuels deflation fears

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By Euronews  with Reuters
Latest eurozone price weakening fuels deflation fears

<p>The eurozone’s price problem continues as – dragged down by cheaper oil – inflation fell in February. </p> <p>It was down by 0.2 percent after rising 0.3 percent in January. </p> <p>But most worrying for the policymakers at the European Central Bank, core inflation – which doesn’t include volatile food and energy prices – dipped.</p> <p>It was at 0.8 percent from the previous month’s 1.0 percent.</p> <blockquote class="twitter-tweet" data-lang="en-gb"><p lang="en" dir="ltr">Euro area inflation down to -0.2% in Feb 2016 (0.3% in Jan): flash estimate from <a href="https://twitter.com/hashtag/Eurostat?src=hash">#Eurostat</a> <a href="https://t.co/hxkLKeI6qs">https://t.co/hxkLKeI6qs</a> <a href="https://t.co/vlaPIQ3nXr">pic.twitter.com/vlaPIQ3nXr</a></p>— EU_Eurostat (@EU_Eurostat) <a href="https://twitter.com/EU_Eurostat/status/704244924464701440">29 February 2016</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script> <p>The numbers suggest low oil prices are feeding into the price of other goods and services, creating a so-called second round effect that could entrench low inflation and lead to deflation.</p> <p>That makes it all but certain the <span class="caps">ECB</span> will try to come up with some more fiscal and monetary policy action at its meeting on March 10. However ultra-low interest rates and printing money have so far had little effect. </p> <p>“The inflation data puts more pressure on them to do something. Unfortunately, the number of instruments for them is not increasing.” David Kohl, an economist at Julius Baer, said</p> <p>“Can the <span class="caps">ECB</span> do something about it? Not much, or probably not,” Kohl said, referring to the limited range of tools still left to the <span class="caps">ECB</span> after cutting rates into negative territory and venturing into unconventional policies.</p> <p>The dismal inflation figures come on top of weak sentiment and output data which indicate the currency bloc’s tepid growth is slowing.</p> <blockquote class="twitter-tweet" data-lang="en-gb"><p lang="en" dir="ltr">Euro area flash inflation: Services +1.0%, Food +0.7%, Other goods +0.3%, Energy -8.0% in Feb 2016 <a href="https://twitter.com/hashtag/Eurostat?src=hash">#Eurostat</a> <a href="https://t.co/hxkLKeI6qs">https://t.co/hxkLKeI6qs</a></p>— EU_Eurostat (@EU_Eurostat) <a href="https://twitter.com/EU_Eurostat/status/704245102621945856">29 February 2016</a></blockquote> <script async src="//platform.twitter.com/widgets.js" charset="utf-8"></script>