Spain falls into deflation, upping pressure on ECB

AP News
Posted: Mar 28, 2014 12:45 PM

MADRID (AP) — 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 percent 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 percent, but the 18-country currency zone's rate was only 0.7 percent in February, revised downward last week from an initial estimate of 0.8 percent. 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 percent, compared with 1 percent 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 percent.

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