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Inflation

Eurozone prices fall again, sparking new fears of deflation

Eurozone inflation figures for December 2013 show that prices in the currency area remain below the European Central Bank’s (ECB) desired target. The trend might once more force the ECB to counteract deflation worries.

Eurozone inflation slipped to 0.8 percent in December, down from 0.9 in the previous month of November, according to latest figures released by the EU Statistics Office, Eurostat, on Tuesday.

Eurostat data showed a worrying decline in the core inflation rate, which excludes energy, food, alcohol and tobacco. It fell to an all-time low of 0.7 percent.

"It constitutes the weakest reading on record and reflects a marked slowdown in services price inflation," James Ashley, senior economist at RBC Capital Markets told AP news agency.

Economists blamed tough austerity measures in crisis-hit eurozone countries for the low December reading. They said the policies had sucked demand out of the economies, pushing inflation well below the European Central Bank’s (ECB) price stability target of 2.0 percent.

The low rate of inflation in December appears set to raise renewed concerns that the 18-nation eurozone may face a period of deflation, which is marked by a protracted fall in prices that chokes off consumer spending and business investment.

In October, a monthly inflation rate of just 0.7 percent prompted the European Central Bank to lower its key interest rate to 0.25 percent in an effort to boost prices. The intention was that cheaper money would spur lending to consumers and companies, thus increasing demand and production.

Most economists believe, however, that the ECB will keep its monetary policy unchanged at its meeting Thursday, waiting until an ongoing fall in inflation will require further measures.

uhe/ph (AFP, AP, dpa)

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