Eurozone enters deflation more than expected at -0.2%, Eurostat reveals

The Eurozone has entered deflation more than expected, Eurostat revealed in its flash estimate on Wednesday, adding to hopes of further stimulus measures by the European Central Bank (ECB).

Eurozone consumer prices fell 0.2% in December following a 0.3% increase a month earlier. Analysts had predicted a drop of 0.1%.

Eurostat said the decline was driven by energy prices, down 6.3% in December compared to a slip of 2.6% in November.

Prices remained stable for food, alcohol and tobacco as well as non-energy industrial goods. The only annual increase
is expected for services with 1.2% growth last month, following a stable November.

The report is likely to raise speculation that the ECB will introduce full-blown quantitative easing at its 22 January meeting to address price instability and the fragile economy.

“These really are desperate times for the Eurozone with the monetary bloc finally slipping into deflation. Mario Draghi can’t afford to sit on his hands any longer and the introduction of a bond-buying quantitative easing programme later this month now looks increasingly likely," said Dennis de Jong, managing director at UFX.com of the ECB President.