The eurozone has crashed into dangerous deflation territory for the first time since 2009 as Brent crude oil briefly slipped below the $50-a-barrel mark.
Prices across the single currency bloc were 0.2% lower in December than a year earlier, the first incidence of outright deflation across the eurozone since October 2009.
The fall, largely driven by a tumbling oil price, was worse than the 0.1% decline expected by economists, and piles the pressure on European Central Bank boss Mario Draghi to launch a full-scale money-printing programme this month.
Inflation has been below the ECB’s target of “close to 2%” for two years despite numerous efforts to kick-start the economy including a historic move into negative interest rates.
Even deeper inflation is expected in the months ahead, spurring Draghi into action.
ING’s Teunis Brosens said: “The question no longer seems ‘if’ the ECB is going to announce quantitative easing on January 22, but ‘how’ it will be tailored.”
Brent crude dipped briefly to $49.66, having plunged by more than half since its $115-a-barrel peak last year.
A global supply glut with booming shale production, as well as a reluctance from cartel Opec to cut production, has combined with growth worries over the eurozone and China to pummel prices.
Even more pain could be in prospect, City experts say. Spreadex financial analyst Connor Campbell said: “Brent crude could find itself desperately using $49 per barrel as a support level. However, in this current oil-adverse climate, even this mark may be optimistic.”
Markets also fretted over Greece today, pushing the nation’s benchmark borrowing costs for 10 years above the 10% mark for the first time since September 2013.
Investors fear victory for the far-left Syriza party may lead to a stand-off between Berlin and Athens over austerity measures agreed in bailout deals worth a combined €240 billion (£188 billion).
