Eurozone Inflation is Negative Again at its Lowest Level in 4 Years

Inflation in the Eurozone fell to its lowest level in more than four years, falling further in the negative zone than expected in September and raising fears of a price deflation spiral due to the Covid-19 pandemic.

The European statistics office Eurostat said in preliminary estimates that consumer prices in the 19-nation euro zone fell 0.3% year-on-year in September, and rose 0.1% on a monthly basis.

Economists polled by Reuters had expected a decline of 0.2% year-on-year.

The drop is the largest since April 2016, when inflation was also recorded at -0.3%.

Energy prices fell 8.2% year-on-year in September, after falling 7.8% in August. Prices for industrial goods other than energy also fell 0.3%, after falling 0.1% in August.

Excluding volatile energy and often changing unprocessed food prices, what the European Central Bank calls core inflation is up 0.4% from its level a year ago.

Experts polled by Reuters had expected a further increase of 0.8% year-on-year.

A narrower measure that excludes alcohol and tobacco prices and is closely monitored by market experts, rose 0.2%year on year, less than half what economists expected.

The European Central Bank wants to keep inflation below 2%, but near that level in the medium term.