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Weaker inflation to provide little relief

Euro-zone activity indicators continue to point to a broad-based worsening in economic conditions. Admittedly, the prospect of further falls in CPI inflation (see Chart) following the recent plunge in the oil price is at least one piece of good news for struggling households, particularly if it helps to prompt the ECB to reduce interest rates. Nonetheless, with the fall in the oil price largely reflecting growing concerns about global growth prospects, weaker inflation is unlikely to bring a turnaround in the euro-zone’s economic fortunes.

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