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Euro zone deflation eases further as QE takes hold

Deflation in the euro zone eased in March, according to official data published Tuesday, prompting hopes that the region's trillion-euro stimulus program was taking effect.

Prices fell 0.1 percent year-on-year in March, according to flash estimates released by Eurostat, in line with forecasts. It comes after a 0.3 percent decline in prices in February.

Deflation took hold in the euro zone for the first time since 2009 in December, as prices slipped 0.2 percent year-on-year. Things got worse in January, when data revealed that prices had fallen 0.6 percent on an annual basis.

The inflation figures are the first since the European Central Bank's (ECB) launched its 1 trillion euro ($1.07 trillion) quantitative easing (QE) program, in an effort to boost the euro zone economy.

Krisztian Bocsi | Bloomberg | Getty Images

Other data from Eurostat published Tuesday showed that the region's unemployment rate was 11.3 percent in February, down slightly from 11.4 in January. This was the lowest rate recorded in the euro area since May 2012, Eurostat said in a statement.

Questioning QE?

Howard Archer, chief U.K. and European economist at IHS Global Insight, said that both data points were "reasonably encouraging" and could prompt markets to question whether QE will continue long-term.

"Overall, the data will likely dilute fears that deflation could become entrenched in the euro zone with long-term debilitating growth effects," Archer said in a note Tuesday.

"In fact, it may not be long before the markets start seriously questioning whether the ECB will continue to fully enact its quantitative easing program all the way through to September 2016."