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European Inflation Slides To Lowest Since 2009

Tyler Durden's picture




 

Back in October, when European inflation shocked market observers after it tumbled to a then (revised)low of 0.7%, the reaction by the ECB was to shock everyone and lower rates by 25 bps - a completely unexpected move. Earlier today, Europe shocked everyone once again after it reported that annual Eurozone consumer inflation in March tumbled from 0.7% to a paltry 0.5%, the lowest level since November 2009, below already the depressingly low 0.6% forecast, driven primarily by energy costs which tumbled 2.1% courtesy of Japan continuing to export deflation (where are energy costs soaring? Look at the price of natgas in Japan for a hint).

Reuters has more:

Inflation has now been in the ECB's "danger zone" of below 1 percent for six consecutive months, and the flash reading increases the chances the ECB will cut interest rates when its Governing Council meets on Thursday. Speculation has also grown that it may employ other easing measures such as a negative deposit rate or even U.S.-style bond-buying.

 

But this year's late Easter, which has delayed the impact of rising travel and hotel prices at a time when many people go away in Europe, could encourage the euro zone's central bank to wait until its June meeting to act.

 

"This will keep the possibility of further monetary policy easing very much alive," said Nick Kounis, head of economic research at ABN AMRO in Amsterdam. "Nevertheless, the central bank has shown quite some tolerance for low inflation recently." ECB President Mario Draghi suggested after the ECB's March meeting that the bank will either do nothing or take bold action should the outlook deteriorate.

 

He has also said the bank has been preparing additional policy steps to guard against possible deflation, and that the longer inflation remained low, the higher was the probability of deflationary risks emerging.

 

The relentless weakening trend may focus minds, especially after the head of Germany's powerful central bank came out to discuss some of the bolder options in more detail, for example pumping more money into the economy via a bond-buying programme.

 

"There's still a case for easing, but we don't think there's going to be enough agreement within the Governing Council members to ease on Thursday," said Guillaume Menuet, an economist at Citigroup in London.

Not only that, but considering the relentless barrage of 'hints" at the ECB joining the Fed and BOJ at QEing, even by Buba's Weidmann, one can be absolutely certain that the ECB will do at most a token act, if anything, in its upcoming meetings. After all the ECB is now convinced, after Draghi's "whatever it takes" comments, that it can talk not only FX but inflation (and deflation) up and down. Alas, while Draghi may have fooled investors into buying Greek bonds two years after the country's default with nothing having been fixed, he will have a more difficult time halting the deflation-exporting juggernaut that is Japan. And furthermore, the last thing the collateral-starved world needs now, is to further impair the shadow banking machinery consisting of repo, margin and rehypothecation, all of which needs unencumbrable assets to operate. Assets which can not be in the possession of the central bank, as the Fed, which now owns 35% of all 10 Year equivalents, has found out the hard way.

 

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Mon, 03/31/2014 - 09:23 | 4610233 Haus-Targaryen
Haus-Targaryen's picture

Negative overnight rate next month. 

You saw it here first.

Gold, silver, FTW. 

Mon, 03/31/2014 - 09:25 | 4610244 MFLTucson
MFLTucson's picture

Where is their food coming from, a space station on Mars?

Mon, 03/31/2014 - 09:59 | 4610253 LawsofPhysics
LawsofPhysics's picture

Ah yes, because the cost of living in the E.U. just keeps going down for all those wageless young folks...

I am sure their quality of life just keeps getting better too...

/s

To all the unemployed youths in 'merica; At least your unemployed colleagues in the E.U. didn't have to go into debt to get a quality education...

and this applies not only to the profession class (lawyers doctors etc.) but also to all those people in the technical trades as well (plumbers, farmers, electricians etc.).

 

Why the american youth and every unemployed person under 40 in america isn't building guillotines right now is beyond me...

Mon, 03/31/2014 - 09:28 | 4610255 buzzsaw99
buzzsaw99's picture

so moar kleptocracy on deck then?

Mon, 03/31/2014 - 09:29 | 4610256 coulous
coulous's picture

No snow this winter in Europe !! but rains ...

Lower energy price !

Mon, 03/31/2014 - 09:29 | 4610261 Cattender
Cattender's picture

i'm buying Silver.. those people in Euroland are doing whatever.. look out America. the change that's on the way is looking SUCKY!

Mon, 03/31/2014 - 09:30 | 4610265 smacker
smacker's picture

"European Inflation Slides To Lowest Since 2009"

 

"European "Officially Reported" Inflation Slides To Lowest Since 2009."

There, I've corrected the article typo ;-)

Mon, 03/31/2014 - 09:39 | 4610293 FieldingMellish
FieldingMellish's picture

Deflation in everything you don't need but is counted. Inflation in everything you need but excluded.

 

BTW, gold to $1275 this week. Silver to make a $17 bottom this summer.

Mon, 03/31/2014 - 09:51 | 4610326 LawsofPhysics
LawsofPhysics's picture

Okay, fine, standing by with dry powder.  I hope we can still take delivery then.

 

Remember, when fraud is the status quo, possession is the law...

Mon, 03/31/2014 - 09:57 | 4610342 Bay of Pigs
Bay of Pigs's picture

Yeah, you said $12 or $15 bucks a few months ago, maybe even less, I can't remember. Make believe TA is worthless.

You will see shortages and delays if prices go that low on silver.

Mon, 03/31/2014 - 09:54 | 4610333 buzzsaw99
buzzsaw99's picture

yellen that sleazy nasty skunk cunt bitch whore skank itchy crotch weasel faced asswipe

Mon, 03/31/2014 - 13:40 | 4611186 Rafferty
Rafferty's picture

Come on Buzz, don't hold back.  Let us know what you really think of Mr. Yellen!

Mon, 03/31/2014 - 09:58 | 4610348 Bill of Rights
Bill of Rights's picture

http://www.marketwatch.com/story/yellen-feds-extraordinary-aid-to-last-f...

 

Federal Reserve Chairwoman Janet Yellen said Monday that the recovery still feels like a recession to many Americans, which is why the central bank will keep its "extraordinary" support for the economy for "some time to come."

 

Go with throttle up!

Mon, 03/31/2014 - 11:00 | 4610584 Cattender
Cattender's picture

MY Magic looking glass says that.. The Fucking Bankers are SCARED SHITLESS! People are NOT spending ENOUGH $$$$!!!!

Mon, 03/31/2014 - 12:29 | 4610902 Ghordius
Ghordius's picture

as usual, as soon as it's about the eurozone, ZH becomes sloppy

that's the inflation headline for the 18-country eurozone, not the 28-country EU

further, the main thing about that excel sheet is lost on everybody: energy costs are counted. and going down (-2.1%) since December. everything else is going slightly up

not the kind of "evil deflation" I'd be busy fighting

Tue, 04/01/2014 - 11:09 | 4613772 paintman
paintman's picture

OMG!  Better rush out and stock up before the prices go down.

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