Euro Area Limping Toward Deflation Fuels QE Calls as ECB Meets

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The euro area is edging closer to the moment that deflation risks become reality.

Companies cut selling prices by the most since 2010 as they attempted to boost sales in the face of a flagging economy and slowing new orders, Markit Economics said today. This in turn is squeezing profit margins and reducing resources for hiring and investing, damping chances of an economic rebound, the London-based company said.

The European Central Bank is pumping money into the banking system to fuel inflation that hasn’t met policy makers’ goal since early last year. With a gauge of manufacturing and services activity pointing to sluggish growth at best, it is under pressure to add to long-term loans and already announced asset-purchase plans to prevent a spiral of price declines in the 18-nation currency bloc.

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Author, Alessandro Speciale for http://www.bloomberg.com

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