Eurozone Inflation Slows Unexpectedly in August

Price growth in the 19-nation currency bloc decelerated to 0.1 per cent in August compared to a year earlier, after standing at 0.2 per cent in July, the European Union statistics office in Luxembourg said on Wednesday. “It could announce an extension of its current quantitative easing program beyond September 2016, raise the amount of its monthly purchases or add additional assets to its basket”, he said. The lowest annual rates were registered in Cyprus (-1.9%), Romania (-1.7%) and Lithuania (-1.0%), as well in Bulgaria (-0.8%), Slovenia (-0.6%), Spain (-.05%).

Inflation was subdued in nearly all of the 19 countries using the euro. In August 2014, the annual inflation rate in the EU-28 was 0.5 percent. The problem lies when prices fall consistently over time for a range of goods – as opposed to temporary declines prompted by, say, a fall in prices at the pump, which can give economic activity a boost.

Greek banks were forced to turn to ELA in February, when the ECB lifted a waiver that had allowed the banks to use junk-rated Greek government bonds as collateral for normal ECB operations.

In a separate report Wednesday, Eurostat said growth in both labor costs and wages slowed in the second quarter.

Emergency European Central Bank funding to Greek lenders fell by 1.35 billion euros in August, Bank of Greece data showed on Monday, after capital controls helped slow deposit outflows. The euro was trading 0.4 percent lower at $1.1230.

“Unemployment remains high and underlying domestic price pressures are weak”, the OECD said in its Interim Economic Outlook.