Eurozone inflation negative in February as energy cost slide

This was well below the 0.3% in January and the analyst consensus estimate of 0.1%, according to Thomson Reuters.

“We now expect euro area headline… inflation to decline to -0.1 percent in February”, Barclays said, referring to a bloc-wide release on Monday. “But if the low energy prices have sustainable long-term effects, we have to act”, he said.

February’s decline was partly down to an expected fall in energy inflation as well as weakened food inflation, but economists cautioned that “most worryingly”, the core rate, excluding food and energy, fell from 1.0 percent to a ten-month low of 0.7 percent in February.

“The review has to be seen against the background of increased downside risks to the earlier outlook amid heightened uncertainty about emerging market economies’ growth prospects, volatility in the financial and commodity markets, and geopolitical risks”, Draghi told a member of the European Parliament in a letter dated March 1.

“The disappointing data from China is keeping alive hopes of more stimulus, and that is helping overall risk sentiment and putting the yen under pressure”, said Yujiro Goto, currency strategist at Nomura, London.

The ECB’s governing council is set to meet on March 9 and 10 to decide how to combat persistently low inflation.

While the European Central Bank can look beyond a short period of lower prices because its target is measured over the medium term, inflation has now been far below 2 per cent for nearly three years. Such a development could spark a deflationary spiral of ever-lower prices that Mr Draghi has said the central bank would definitely take action against.

MSCI’s broadest index of Asia-Pacific shares outside Japan had ended up 1.3 percent too, as Chinese stocks, which are nudging their lowest in a year, climbed 1.8 percent after Monday’s PBOC cut in banks’ reserve requirements.

The European Central Bank had rolled out a range of different policy measures to help get the eurozone economy back on its feet and increase inflation, most recently with a controversial program of bond purchases known as quantitative easing.

The figure was lower than the 0% expected by experts, and suggests eurozone economic growth is slowing.

It has already announced a cut to its bank deposit rate, which remains in negative territory.

Wall Street was expected to rebound 0.6 percent when it resumes, with a deluge of data to feed the debate on whether the Federal Reserve will be able to squeeze up US interest rates any further this year. The 2 percent security due in December 2025 rose 0.09, or 90 cents per 1,000-euro ($1,087) face amount, to 105.375.