Deflation in eurozone looks set to become more entrenched: Capital Economics

Quotes from Capital Economics:

- The rise in German HICP inflation, from -0.5% to -0.1%, was sharper than the published consensus forecast of no change. But given the 20% monthly surge in the oil price, we had always expected the headline rate to increase. Increase in the energy component likely caused the entire pick-up in the headline rate.

- Italian HICP inflation also rose, from -0.5% to +0.1%, and the Spanish rate increased from -1.5% to -1.2%. Together, the data suggest that Monday's euro-zone inflation release will show a rise in the headline rate from -0.6% to about -0.2%. 

- In all, today's data have done little to reduce the threat of deflation in the euro-zone and offer ample justification for the ECB's quantitative easing programme. Indeed, the policy may be too little too late to avoid a sustained and damaging bout of deflation.