Europe News

Prices start to rise in euro zone, easing deflation fears

Consumer prices in the euro zone rose for the second straight month in March, not enough to pull annual inflation out of negative territory but another positive sign as the currency bloc looks to escape prolonged deflation.

Annual inflation in the 19 countries sharing the euro was -0.1 percent in March, the EU's statistics office Eurostat said on Friday, as was forecast by an earlier reading at the start of the month and as expected by economists polled by Reuters.

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In data likely to be welcomed by the European Central Bank, which has launched a U.S-style bond-buying program to stop deflation setting in, consumer prices rose 1.1 percent in March from February, after a string of negative monthly readings.

That number was also as expected in a Reuters poll. While the monthly rise in core inflation, which strips out volatile food and energy prices, was slightly short of expectations at 1.2 percent, the trend appears to be shifting.

The euro zone is far from the deflation that Japan suffered from the early 1990s, when falling prices weakened demand, leading to wage cuts and even lower prices, but the bloc's low inflation rate has shown its fragility since its long crisis.

ECB President Mario Draghi said this week he is committed to the bank's quantitative easing, a relief to some economists who worry the bank's staff forecasts on consumer prices -- at 1.8 percent inflation in 2017 -- are too optimistic.

Last month the ECB embarked on an asset-buying program with 60 billion euros (£43.17 billion) a month of new money, which it has said will last until at least September 2016.

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