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Eurozone Deflation Risks Mount

For the first time in five years, region faces drop in consumer prices year over year.

By Stefan Riecher, Bloomberg | Updated on January 07, 2015

As European Central Bank (ECB) policy makers gather today for their first meeting of 2015, the backdrop is a 0.2 percent annual drop in consumer prices, the first in more than five years. For President Mario Draghi, who wants to open the money tap, the data may push the central bank closer to the unprecedented step of buying government bonds to revive growth and inflation.

ECB officials are working on a plan to purchase sovereign debt as they strive to prevent a deflationary spiral of falling prices and households postponing spending, a risk Draghi has said can’t be “entirely excluded.” In addition to moribund growth, the region risks being further unsettled by elections in at least three countries this year and mounting concern about the future of the single currency.

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