Spain’s deflation rate of 0.2 per cent ups pressure on European Central Bank to loosen policy

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MADRID – Spain’s inflation rate dipped into negative territory this month, official data showed Friday, a development likely to add pressure on the European Central Bank to ease its monetary policies.

The National Statistics Institute said consumer prices in the eurozone’s fourth-largest economy fell 0.2 per cent in March compared with a year earlier.

Falling prices, or deflation, can be a risk if they are protracted. Deflation can choke off growth as consumers and businesses delay purchases in hopes of getting better bargains down the line, and can be very difficult to get out of.

The ECB aims to keep inflation just below 2 per cent, but the 18-country currency zone’s rate was only 0.7 per cent in February, revised downward last week from an initial estimate of 0.8 per cent. Figures for March are due Monday, and the Spanish dip could contribute to a drop, analysts say.

Belgian’s statistics agency on Friday also reported a lower annualized March inflation rate of 0.9 per cent, compared with 1 per cent a month earlier.

Analyst Ralph Solveen of Germany’s Commerzbank said the latest figures suggest Monday’s inflation figure for the eurozone will show another drop to 0.6 per cent.

The ECB’s next rate-setting meeting will take place Thursday.

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