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Eurozone inflation rate drops further to 0.5 per cent, strengthening deflation worries

Photo: The Canadian Press. All rights reserved.

A woman walks on waste ground as others sit by one of many tents near the business district of Madrid, Spain, Friday, March 28, 2014. Official data show Spain's inflation rate dipped into negative territory this month, a development likely to add pressure on the European Central Bank to ease its monetary policies. In it's monthly report released Wednesday, the Bank of Spain said that despite the economic recovery, the unemployment rate of 26 percent should edge down to 25 percent this year and to 23.8 percent in 2015. Spain emerged from a double-dip recession in the third quarter of 2013. (AP Photo/Paul White)

BRUSSELS - Official data show the eurozone's inflation rate in March decreased for the third consecutive month to a new low of 0.5 per cent, a development likely to add pressure on the European Central Bank to ease its monetary policies.

The preliminary estimate for the 18-country currency bloc published by the European Union's statistics agency Monday was down from February's annual rate of 0.7 per cent.

Eurostat says the core inflation rate — excluding volatile food and energy costs — also dropped, from 1 per cent in February to 0.8 per cent in March.

The ECB aims to keep inflation just below 2 per cent, but the data raise the prospect of falling prices, or deflation, which can choke off growth as consumers and businesses delay purchases in hopes of getting better bargains down the line.