The estimated quicker reduction on inflation, now places all eyes on the European Central Bank (ECB) and how they will react to the this news at their policy meeting in Frankfurt on March 16.
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The central bank has missed its inflation target of just under 2pc for the past three years.
Energy drove the decline, with prices down 8% in February compared to a 5.4% slide in January.
The Eurozone consumer price index slipped by 0.2% year-on-year (consensus: 0.0%), according to Eurostat, after advancing by 0.3% in January.
The core HICP that excludes fresh food and energy prices rose 0.8 percent annually after a 1 percent climb in the previous month.
Still, the meeting failed to outline any bold steps and even called on central banks to maintain accommodating policies as weak Chinese growth weighs on all top economies and low commodity prices raise the spectre of deflation. The ECB’s decision previous year to extend the Euro 60 billion per month quantitative easing programme to March 2017 and beyond, was designed to create liquidity resulting in a boost for inflation.
The eurozone did experience a bout of falling prices about a year ago but it didn’t last long, helped in part by the ECB’s stimulus and a falling euro, which made the price of imports dearer.
Falling oil prices and slowing economic growth in China and other emerging economies are weighing on the headline rate of inflation in the 19-country area that uses the European single currency. So-called deflation can become a vicious cycle and push prices down further. That raises the chance of the bank announcing further stimulus measures next month. Food, alcohol & tobacco inflation slowed to 0.7 percent from 1 percent.
“Against this backdrop, a “wait-and-see” approach simply does not appear to be a viable policy option at this stage”, he said.
Indeed, euro zone long-term inflation expectations – as measured by the five-year, five-year euro zone breakeven forward (EUIL5YF5Y=R) – are at record lows below 1.4 percent, suggesting that markets lack confidence in the ECB’s ability to fulfil its mandate.
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The increase in services costs accelerated to 1 percent from 1.2 percent.
