2014.06.3009:27:00UTC+00Eurozone June Inflation Steady At 0.5%

Eurozone inflation remained unchanged at a very low level in June, which may prompt the central bank to undertake more actions to calm fears of deflation and kick start the flattening recovery.

Inflation remained stable at 0.5 percent in June, flash estimate from Eurostat showed Monday. It was forecast to rise slightly to 0.6 percent.

Headline inflation has been below the European Central Bank's target of 'below, but close to 2 percent' for the seventeenth consecutive month.

At the same time, core inflation that excludes energy, food, alcohol and tobacco, rose marginally to 0.8 percent in June, when it was expected to remain at 0.7 percent. Final figures are due on July 17.

A decline of 0.2 percent in food, alcohol and tobacco prices prevented inflation from rising in June. Energy prices were up 0.1 percent from last year and cost of services advanced 1.3 percent. Non-energy industrial goods prices remained flat.

According to ECB staff macroeconomic projections, inflation for this year will be 0.7 percent and 1.1 percent next year.

The ECB has taken interest rate to negative territory early this month and rolled out targeted longer-term refinancing operations. ECB President Mario Draghi signaled that the bank is prepared to do more steps.

IHS Global Insight's Chief European Economist Howard Archer still suspects that the bar for large scale, full blown Quantitative Easing by the ECB is high. It will likely take a further softening in Eurozone consumer price inflation over the coming months and clearly faltering economic activity, he said.

While the ECB is unlikely to act again at its meeting this week, it will ultimately implement a large scale quantitative easing programme to tackle the risk of deflation, Jennifer McKeown, a senior European economist at Capital Economics, said.

Preliminary data from Germany, published last week, raised hopes that inflation will start rising soon in the currency bloc. EU harmonized inflation in Germany rose to 1 percent in June from 0.6 percent in May.

However, Spanish harmonized prices remained flat in June after rising 0.2 percent in May. In Italy, inflation eased to 0.2 percent from 0.4 percent.