Eurozone inflation hits 1999 lows

Euro zone inflation hit its lowest rate since 1999 in February while industrial output unexpectedly fell in January, according to data that spurred concern about the pace of economic recovery.
February inflation was confirmed at 1.6 percent year- on-year, its lowest since November 1999, as consumer prices rose 0.2 percent from the previous month, Eurostat said on Wednesday.
The inflation rate, which has come in below the European Central Bank's tolerance threshold of two percent for two months running, was in line with a previously released flash estimate and fell from 1.9 percent in January.
A separate release showed January industrial production in the 12-nation bloc unexpectedly fell 0.4 percent on a monthly basis and rose a smaller-than-expected 0.6 percent from a year ago.
Analysts said talk of interest rate cuts could grow if inflation fell much further under two percent. The European Central Bank aims to keep inflation below, but close to that level.
"This data suggests that the recovery is losing stamina instead of gathering momentum and therefore has the whiff of lower rates," said David Brown, chief economist at Bear Stearns in London. "It will move the market closer to the notion of the ECB easing as we could see an inflation rate fall close to one percent in March."
National inflation rates in the eurozone varied from a high of 2.6 percent in Greece to 0.4 percent in Finland.
The core rate of inflation referred to by the ECB, which excludes volatile energy and unprocessed food costs, came in at 2.0 percent, with prices on this measure rising by a larger-than-expected 0.4 percent from a month earlier.
The monthly and annual increases in headline inflation were in line with economists' expectations. However, their consensus forecast had been for core prices to post a monthly increase of 0.2 percent and an annual one of 1.7 percent.
Economists' consensus forecast had been for industrial production to rise by 0.2 percent from the previous month and by 1.7 percent from a year earlier.
The output data came in weaker than expected as all the listed components of the index, except the production of durable goods, fell from the previous month.