Eurozone inflation remains sluggish as Draghi’s policies fail

Figures from December show that the eurozone is stuck with low inflation, in spite of monetary policies designed to invigorate the economy

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Mario Draghi, the ECB President, has seen his monetary reforms fail to spark life into the eurozone

As a result of sluggish wage growth, persistently high unemployment rates and low energy costs, the Eurozone’s inflation rate remained below expectations at the end of 2015. New data, released on January 5 2016, showed that the economic region’s rate of inflation was a meagre 0.2 percent in December. This fell short of the 0.4 percent rate previously forecasted and way below the European Central Bank’s official target of two percent.

Low prices for energy – stemming from the persistently low cost of world oil – and other non-energy industrial goods and commodities are to blame, offsetting modest price rises for other goods. According to Eurostat: “Food, alcohol and tobacco is expected to have the highest annual rate in December (1.2 percent, compared with 1.5 percent in November), followed by services (1.1 percent, compared with 1.2 percent in November), non-energy industrial goods (0.5 percent, stable compared with November) and energy (-5.9 percent, compared with -7.3 percent in November).”

New data, released on January 5 2016, showed that the eurozone’s rate of inflation was a meagre 0.2 percent in December

However, the monetary union’s core inflation rate was also disappointing, though stable. Determined by removing goods prone to greater price volatility such as food and energy, the Eurozone’s core inflation rate was 0.9 percent.

Mario Draghi’s attempt to stimulate the Eurozone’s economy in December by easing monetary policy is also seen to be partly to blame, due to its supposed half-heartedness. “In all, then, we still think that the ECB was too timid in December, and see it being forced to up the pace of its asset purchases before too long”, said Jennifer McKeown, Senior European Economist at Capital Economics, reported The Nation.