World Economy

Low oil prices drag on Euro zone inflation


Euro zone annual inflation came in at 0.2 percent in August on Monday, marking a stable reading for the second month in a row.

Price gains across the euro zone held steady at 0.2 percent year-on-year, according to a flash estimate from Eurostat, the statistical office of the European Union. This was marginally better than forecast, with analysts polled by Reuters expecting a 0.1 percent gain.

The last gain to year-on-year inflation was clocked in May, when prices rose by a still-mild 0.3 percent.

Low energy prices were a major drag on August inflation. Oil and gas prices across the euro zone saw a year-on-year decline of 7.1 percent.

A buyer picks up euro coins in a supermarket in Vilnius on January 1, 2015.
Petras Malukas | AFP | Getty Images

The latest figures are a far cry from the 2 percent inflation target set by the European Central Bank (ECB) and is likely to provide further impetus for the bank to continue its 1 trillion euro ($1.1 trillion) asset purchasing program.

BNP Paribas analyst, Dominique Barbet, said that the latest figures were unlikely to cause the ECB to change policy, adding that the bank should instead focus on the impact of the rout that sent global stocks plummeting last week.

"The ECB needs to wait for dust to settle in order to better read the impact of the recent financial markets volatility onto the euro zone economy," he said in a research note Monday.

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