BRUSSELS: Eurozone consumer prices stopped falling in April, further easing fears that a slide into deflation could derail the currency area’s fragile economic recovery.
The European Union statistics agency Eurostat on Thursday said consumer prices were unchanged from a year earlier, having fallen in each month since December.
That fall in prices prompted the European Central Bank to launch a program of quantitative easing earlier this year. Under the program the ECB will buy more than €1 trillion ($1.11 trillion) of mostly government bonds by September 2016.
The central bank feared that the collapse in energy prices toward the end of last year would lead to declines in the prices of other goods and services. That in turn could have triggered a deflationary spiral, during which consumers and businesses delay spending, damping economic growth.
“It’s quite clear that our monetary policy stance avoided that risk,” ECB President Mario Draghi said at a news conference earlier this month.
With the halt of price declines, inflation seems likely to return to the eurozone a little earlier than the ECB had expected, and is a further indication that QE is helping to keep the recovery on track.
However, the prospect of an earlier-than-expected end to the period of falling prices has already led to speculation in financial markets that the ECB may end its bond purchases earlier than planned, or buy smaller amounts of debt.
Things are developing slightly more positively than expected a few months ago,” ECB governing council member Ardo Hansson said in an interview with The Wall Street Journal on Wednesday.
But he said it is “premature” to discuss whether the ECB should end its QE program earlier than intended.
The stabilization in the index of consumer prices—a broad measure of inflation largely reflects a partial rebound in energy prices, which were 5.8% lower than a year earlier in April, having been down 6.0% in March.
Excluding prices for energy, food and alcohol, inflation remained very low. The core annual rate was unchanged at 0.6%, remaining at the record low reached in January. Services prices rose by 0.9% on the year, the lowest rate of increase on record and a sign that weak demand is damping prices.
