Energy rise ends four months of eurozone deflation

The eurozone ended four months of deflation in April, with consumer prices unchanged from year-ago levels, removing the threat of persistent price declines as energy costs pushed up in the month.

Consumer prices in the 19 countries that share the euro were flat in April from a year earlier after a 0.1% decline in March, the European Union’s statistics office Eurostat estimated.

The bottoming out of price declines is likely to be welcome news for the ECB, which wants to keep inflation below, but close to 2% over the medium-term.

It started printing money in March to inject more cash into the economy and ward off concerns of persistently falling prices, or deflation.

Economists have said inflation should become positive in the second half of 2015 as energy becomes less of a drag given oil prices started falling sharply from June last year. Indeed, some are already questioning whether the ECB will need to carry out quantitative easing all the way through to September 2016.

Ralph Solveen, economist at Commerzbank, said it was too early to say whether the ECB’s quantitative easing was already having an impact. “Whether it’s the positive things such as the better economic data we’ve had recently or low inflation. QE can’t work that fast,” he said.

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