Recent evidence of a slowdown in the euro-zone’s economic recovery has been accompaniedby a drop in consumer price inflation back below zero in February. The fall was partly down to food and energy effects and a prolonged bout of deflation looks unlikely for now. Nonetheless, with core price pressures still very subdued and inflation expectations low and falling, the return of deflation has added to the pressure on the ECB to decisively increase its policy support at its March meeting.
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