Eurozone deflation hits -0.6% Sharp drop in prices magnifies problems for economic policymakers.

The eurozone experienced negative inflation for the second month in a row, according to a flash estimate published today (30 January) by Eurostat, the European Union's statistical office. Inflation is expected to be at -0.6%, with consumer prices falling further than economists had forecast.

The fall represents the biggest decline in prices in the history of the euro. It is down from -0.2% in December. Economists had expected a -0.5% drop. A separate paper published today recorded eurozone unemployment at 11.4% in December, compared with 9.9% across the EU as a whole.

The drop was driven by the fall in energy prices (-8.9%, compared with -6.3% in December). Prices are expected to fall for food, alcohol and tobacco (-0.1%, compared with 0.0% in December) and non-energy industrial goods (-0.1%, compared with 0.0% in December). Only prices for services are expected to increase (1.0%, compared with 1.2% in December).

The deflationary spiral comes as Mario Draghi, the president of the European Central Bank (ECB), is trying to tackle deflation with a policy of quantitative easing. Last week he announced a bond-buying plan that will inject €60 billion a month into the economy from March this year until September 2016.

The ECB's target rate for inflation is close to, but below, 2%.

Core inflation, which excludes volatile energy and unprocessed food prices, was at 0.6% in January, down from 0.7% over the previous three months. The ECB has characterised any rate below 1% as a "danger zone".

Headline inflation has also been in what the ECB calls the "danger zone" below 1% since October 2013. The ECB aims to keep inflation just under 2% over the medium term.