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Eurozone inflation falls for third straight month

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Eurozone inflation falls for third straight month
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Inflation in the eurozone was down for the third month running in March.

The first assessment by the EU’s statistics agency, Eurostat, was that inflation rose 1.7 percent from the same month last year.

In January it was 1.8 percent

The prices of food, alcohol, and tobacco posted the biggest gains.

The recession in Europe has lessened the pressures that drive inflation – such as the demand for energy, while high unemployment has kept a lid on wage rises.

The fall to 1.7 percent means the inflation figure remains below the European Central Bank’s target of close to, but not above, two percent.

So ECB head Mario Draghi and his policymakers have leeway to cut interest rates to stimulate the economy as they meet this week.

But most economists expect them to wait to see if the grim eurozone economic picture brightens before using their limited remaining powers.

“I think it’s too early, but one more round of bad numbers and I think we will hear Draghi signal a near-term rate cut,” said Nordea analyst Anders Svendsen.

Investors will be looking to Draghi for reassurance. Many are betting Slovenia will be next to need a rescue, though Finance Minister Uros Cufer last week said the country would not need one this year.

“It’s not just the Cyprus debacle, there are also growing worries about Slovenia and the latest data has taken a downturn in March,” said Howard Archer, economist at Global Insight. “I’m sure he’ll do his best to sound reassuring on all fronts.”