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German inflation falls to zero in February

Xinhua, February 27, 2016 Adjust font size:

Driven by a sharp drop of energy prices, German annual inflation falls to zero in February, fueling speculations that the European Central Bank (ECB) would further loosen its monetary policy next month.

Compared with the previous year, consumer price index (CPI) in Germany remained unchanged in February, said German federal statistics office Destatis on Friday. In January, consumer prices in Europe's biggest economy rose by 0.5 percent annually.

The main factor behind the stagnation was energy prices which dropped by 8.5 percent, according to Destatis.

Measured with the harmonized consumer price index (HICP), for comparison with other European countries, German annual inflation fell back to a negative territory after nearly a half year. In February, the German HICP inflation went down to minus 0.2 percent, the lowest level since January 2015.

The ECB sees an inflation rate of "below, but close to" 2 percent as being healthy for the economy. The German figures on Friday added pressure on the central bank for more measures to lift prices.

The ECB has cut a benchmark interest rate to minus 0.3 percent, charging commercial banks for placing their extra money at the central bank instead of lending out. Every month, it injects 60 billion euros (65.5 billion U.S. dollars) into the market via purchasing bonds and securities.

ECB President Mario Draghi said in January that the central bank would "possibly reconsider" its monetary policy at a meeting on March 10 and there was "no limit of how far we are willing to deploy our instruments within our mandate".

Analysts expected that the ECB would further cut its interest rates and purchase more assets in order to prevent the euro zone from falling into a deflation spiral. Endit