Deflation is a fact in the euro zone but large heterogeneity impedes ECB to act

EURO ZONE: February producer price index fell 0.2% on the month and 1.7% on the year against expectations of no change and down 1.7% respectively.

Euro-zone producer prices were falling at their fastest rate in February since December 2009. With pipeline inflation exerting downward pressure and consumer prices already low – the most recent release showed they were running at an annual 0.5% pace – the European Central Bank will have plenty of reason to worry about deflation. But with the region’s economy picking up, expectations are for the ECB’s policymakers to sit on their hands until at least the summer. (AM)