Consumer prices were slightly weaker than originally reported in February. The monthly change was revised down from 0.1 percent to 0.0 percent, in turn reducing the annual inflation rate by a tick to 0.5 percent. This was some 0.4 percentage points short of its final January mark and equalled its lowest outcome since November 2016.
At the same time, the flash HICP was trimmed by an unusually large 0.2 percentage points to leave a 0.5 percent drop on the month and a 0.5 percent yearly rate, down sharply from a final 1.2 percent print last time.
The deceleration in the annual CPI rate was mainly due to falls in inflation in food and drink (minus 0.8 percent after 1.3 percent) and regulated energy (5.3 percent after 6.4 percent). Consequently, the core rate, which excludes fresh food and energy, was steady at January's 0.6 percent, although even this still constituted a 0.1 percentage point dip versus its provisional reading.
The overall annual inflation rate is now fully 1.4 percentage points below its April 2017 high. The underlying rate has hardly moved but the risk is that a sustained run of weak headline figures puts fresh downside pressure on inflation expectations. If so, the core rate could start to slip too, and from current levels, there is not much room before deflation becomes a serious problem again.