Eurozone and US inflation falls back on weaker oil price

US shoppers
Image caption Prices rises are weak in both the US and Europe thanks to low oil prices and weak employment growth

Inflation in both the 17-strong eurozone bloc and the US has fallen to its lowest level in years.

The eurozone figure, for April fell to 1.2% - a three-year low. US inflation was running at 1.1% - a two-year low. Both countries target inflation at 2%.

In both cases the prime cause of the fall was a lower oil price, which is down from just less than $120 a barrel in March to about $93 a barrel now.

Weak demand across both economies was also a factor.

The sharp fall in the cost of fuel caused the US monthly inflation rate to fall at its sharpest pace since December 2008.

The US economy is growing more strongly than most of Europe, but remains patchy, while high unemployment has put downward pressure on wages, making it harder for retailers and other firms to raise prices.


Figures on Wednesday showed that the eurozone was still in recession, as weak growth in some parts was offset by budget cuts and unemployment in others.

Inflation fell in France, which was reported to have slipped back into recession this year, and in Germany, which grew by an anaemic 0.1% in the first three months of this year.

Greece saw overall deflation - on average, prices were actually lower than previously - instead of what is seen in normal economic conditions, in which some prices rise and some fall.

Earlier this month, the European Central Bank (ECB) cut interest rates to a record 0.5%, a move designed to spark growth.

Low interest rates can also unleash inflation, but when economic growth is very weak, authorities worry more about deflation. This can depress economic activity, as consumers hold off buying goods in the expectation they will become cheaper in coming months.

There are few signs that inflation is likely to be a threat in the near future, it is well below the ECB's target rate of 2% in any case.

The highest price rises were found in Romania, Estonia and the Netherlands.

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