RTTNews - The Euro area consumer prices logged zero growth in May, which was the lowest since records began in 1996, raising deflationary concerns in the economy, a preliminary estimate from the European Union statistics office indicated Friday.

Annual inflation remained flat in May versus 0.6% in April. Economists had expected consumer prices to rise 0.2% year-on-year in May from the previous year.

The Eurostat is slated to issue the final data on June 16.

Economist at Dresdner Kleinwort, Rainer Guntermann said consumer price inflation would pick up again moderately in autumn. However, the fundamental economic outlook indicates a low inflation environment for a longer period.

According to Guntermann, rise in oil prices would not prevent consumer prices from moving into negative territory in the months ahead. The economist sees a moderate rise in inflation in the second half of the year. He noted that a trend reversal to an inflationary economic climate is not visible in the foreseeable future.

The economist does not expect any rate cuts or an expansion of the programme to buy up covered bonds at the moment from the European Central Bank. Monetary policy remains expansionary in the foreseeable future, he said.

Earlier in May, the ECB announced its plan to buy euro-denominated covered bonds, joining the Federal Reserve and other central banks in buying debt under their quantitative easing policies. The ECB also reduced its key interest rate by 25 basis points to a record-low 1%.

Among major Eurozone economies, the German EU harmonized index dropped 0.1% annually. The Spanish HICP dropped 0.8% year-on-year versus a 0.2% fall in April. Meanwhile,the Italian harmonized inflation was 0.8% in May.

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