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Eurozone inflation in “the danger zone”

eurozone2Inflation in the eurozone remains stable at 0.5% in June, according to a flash estimate from Eurostat.

This is the ninth month in a row of inflation rates below the target of near 2%, which is what the European Central Bank wishes to see.

ECB president Mario Draghi has referred to inflation below 1% as being in "the danger zone".

During June, the Bank introduced new measures to help the eurozone economy gain traction, including cheaper bank loans and negative interest rates. Both moves are designed to push money into the economy.

Analysts fear that low inflation could damage prospects of recovery. Concerns are also raised over the possibility of the whole area falling into deflation. In such times, consumers wait to make purchases until prices fall further.

The data released show that the service industry experienced significant price growth, rising 1.3%. On the other hand, food, alcohol and tobacco prices fell 0.2%.

The statistics are for the 18 member states, without any country specific information so it was not possible to report on Portugal’s situation. Deflation has, however, already taken hold in Portugal, as well as Greece and Cyprus.

Because people are earning and spending less, households and businesses have a harder time paying off their debts, which total 240% of gross domestic product.

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