In October consumer prices were just 0.4 per cent higher on average than a year earlier. Low inflation is a widespread phenomenon: in only 2 countries out of 18 is the inflation rate above 1 per cent. The slowdown in prices raises real interest rates, discouraging investment by firms and dampening demand for credit; it also increases the burden of debt service.
31 A falling rate of inflation verging on deflation has particularly serious repercussions for the euro area today: it hinders deleveraging in countries with high public or private debt; it slows the readjustment of relative prices between the various economies, and accordingly the recovery of competitiveness and the elimination of external imbalances where necessary. These price trends were partly unexpected.