Euro zone inflation continued to plunge on crashing oil prices but underlying price growth held steady, a hopeful sign for European Central Bank policymakers desperately trying to stave off the threat of deflation amid the bloc's recession.
FILE PHOTO: A worker with a protective face mask checks a machine at Mydibel Group factory, a manufacturer of chilled, frozen and dehydrated potato products, amid the outbreak of the coronavirus disease in Mouscron, Belgium April 29, 2020. REUTERS/Yves Herman/File Photo
Consumer prices in the 19 countries sharing the euro fell to a four-year low of 0.1% in May from 0.3% in April, well short of the ECB’s target of almost 2%, as energy prices dropped by 12% on a global recession and political scuffles among top oil producers. While all the readings are below its target, the ECB has little power to control short term price growth and instead wants to avoid low prices getting entrenched and leading to a difficult-to-break deflationary spiral.
But the ECB is still likely to provide more stimulus in June or July as the euro zone economy shrinks by a tenth this year and coronavirus-related restrictions stay in place longer than initially feared.
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