Eurozone inflation drops to lowest level since 2009

Expectations growing that ECB will cut interest rates on Thursday

Expectations are growing that the ECB will cut interest rates at its monthly meeting on Thursday afternoon. Photograph:  Lisi Niesner/Reuters

Expectations are growing that the ECB will cut interest rates at its monthly meeting on Thursday afternoon. Photograph: Lisi Niesner/Reuters

Mon, Mar 31, 2014, 11:35

Inflation in the Eurozone dropped to 0.5 per cent in March, the lowest level in over four years, raising expectations that the European Central Bank might move on interest rates on Thursday.

According to Eurostat, consumer prices grew by 0.5 per cent in the year, after a 0.7 per cent gain in February.

Justin Doyle, an economist with Investec, said that the move increases the chances of some action by the ECB at their monthly meeting on Thursday afternoon.

The expectation is that the ECB will cut interest rates further and it may employ other easing measures such as a negative deposit rate or even US-style bond-buying.

Services is expected to have the highest annual rate in March (1.1 per cent, compared with 1.3 per cent in February), followed by food, alcohol & tobacco (1.0 per cent, compared with 1.5 per cent in February); non-energy industrial goods (0.3 per cent, compared with 0.4 per cent in February); and energy (-2.1%, compared with -2.3 per cent in February).