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Business

Eurozone deflation fears subside in March

The fall in consumer prices across the eurozone continues to ease, as inflation inches towards positive territory. Economists are cautiously optimistic the recent stretch of deflation is coming to an end.

Consumer prices across the eurozone dropped by only 0.1 percent in the year to March, official data showed Friday, further easing fears over sustained deflation in the 19-member bloc.

The modest decline was up from February's 0.3-percent drop, with low energy costs still impacting the cost of living, according to the European Union's statistics agency, Eurostat.

The plunge in energy prices has slowed, however, falling to 5.8 percent in March compared with a 7.9-percent decrease in February.

Negative inflation rates since December have raised concerns the eurozone would suffer a crippling stretch of deflation, with sustained falls in prices weighing on economic activity.

But EU officials have been adamant in saying the eurozone is not in deflation, arguing the drop in consumer prices have been driven by external factors, like oil and food prices, rather than an across-the-board drop in price levels.

ECB stays the course on deflation

In addition, the European Central Bank (ECB) this week announced it would forge ahead with its controversial bond-buying scheme aimed at fighting deflationary pressure in the eurozone economy

"Our focus will be on the full implementation of our monetary policy measures," ECB President Mario Draghi said, stressing his resolve to stay the course until the 60-billion euro ($63.6-billion) a month money-printing program is set to expire in September 2016, at a total cost of 1.1 trillion euros.

Draghi also expressed surprise at speculation of an early end to the bank's asset purchases - known as quantitative easing (QE) - saying the measure was needed to further improve the eurozone's economic outlook.

uhe/hg (AFP, Reuters)

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