Eurozone April inflation firmed, but far behind OECD trend

Eurozone inflation picked up in April to 0.7 percent, the OECD said on Wednesday, amid expectations that the European Central Bank will act on Thursday to avert the dangers of eurozone deflation.
That was an increase from 0.5 percent, over 12 months, in March.
Across all of the 34 advanced democracies covered by the Organisation for Economic Cooperation and Development, inflation firmed sharply to 2.0 percent in April.
That was up from 1.6 percent in March.
In Japan, inflation shot up to 3.4 percent in April, from 1.6 percent in March, to the highest rate since 1991 because of a rise in consumption tax.
For the OECD countries covered, but outside the 18-member EU, the rise in prices was driven largely by a 2.7-percent increase in the price of energy.
The figures for the eurozone, are important because of deep concern that sluggish recovery and low bank lending, together with the strength of the euro pushed by funds flowing back from emerging markets, could cause prices to fall for an extended period.
This can be extremely difficult for central banks to counter by easing monetary conditions, as the ECB is expected to do on Thursday.
Businesses and households anticipate further price falls and so delay purchases, which reduces demand, and therefore economic activity and tax revenues, and pushes up unemployment.
Deflationary tendencies are particularly marked in some countries in the region economists refer to as emerging Europe, which includes some EU members.
Moreover, the OECD statement noted that more recent, initial data for the eurozone from the EU statistics agency showed that inflation for May fell to 0.5 percent.
Central banks in advanced countries in general set their medium-range inflation target at about or just under 2.0 percent. This allows enough extra liquidity to oil economies but not so much that people begin to anticipate price rises, and so begin stocking up or demanding pay increases wich drive what is known as second-round inflation.
The OECD gave other key inflation figures for April:
United States 2.0 percent from 1.5 percent in March, Canada 2.0 percent from 1.5 percent, Germany 1.3 percent from 1.0 percent, Italy 0.6 percent from 0.4 percent, Britain 1.8 percent from 1.6 percent and France 0.7 percent from 0.6 percent.
Among G20 countries outside the OECD, it said that in India inflation rose to 7.1 percent from 6.7 percent, Russia to 7.3 percent from 6.9 percent, Brazil to 6.3 percent from 6.2percent , South Africa to 6.2 percent from 6.1 percent.
In China inflation fell to 1.8 percent from 2.4 percent.