Inflation in Euro Zone Falls to 0.5%

FRANKFURT — Inflation in the euro zone slowed to an annual rate of just 0.5 percent in March, lower than expected, according to an official estimate released on Monday, as prices remained subdued in Germany.

Economists had been expecting prices to rise at an annual rate of 0.6 percent, from a rate of 0.7 percent in February. A further decline had been expected after Germany, which has the largest economy in the euro zone, reported on Friday that prices there rose 0.9 percent last month, less than analysts had forecast.

The “core” inflation rate, which strips out volatile energy and food prices, rose at a slightly more robust 0.8 percent rate, but that was down from a 1 percent rate in February. Energy prices were a drag on the overall inflation rate, Eurostat noted, dropping 2.1 percent in March from a year earlier.

The data released on Monday were sure to reignite the debate about whether the euro zone faced a risk of deflation, and to put pressure on the European Central Bank to take action when it meets on Thursday.

Mario Draghi, the president of the European Central Bank, has said that countries in which inflation is weakest needed to lower prices, so that their exports can be more competitive in world markets. Prices in Spain, which has one of the weakest economies in the euro zone, unexpectedly fell by 0.2 percent in March.

Mr. Draghi has also said that much of the decline in inflation comes from lower energy prices.

But the argument becomes more difficult to make when countries like Germany, where unemployment is low and growth is solid, are also seeing very low price growth. The European Central Bank aims to keep inflation just under 2 percent, a level that even according to its own estimates will not be reached until 2016.

Economists are divided over whether deflation is a real risk in the region. Some consider deflation warnings overblown, while others say that the euro zone is in danger of experiencing the same prolonged stagnation seen in Japan, which has been trying to escape deflation for much of the past two decades.

Deflation is considered an especially pernicious economic condition. When prices are falling, consumers delay making major purchases because they expect prices to drop even more. Companies suffer declines in sales and are unable to invest or create jobs. Corporate revenues and wages fall, making it more difficult for people and companies to repay their debts.

As Japan demonstrates, deflation is very difficult for policy makers to correct.

The European Central Bank’s benchmark interest rate is already at a record low of 0.25 percent and it has few easy options left to stimulate growth. But most analysts do not expect the central bank to take action Thursday.

“We still think that the ECB’s preferred next policy option is to do nothing,” Carsten Brzeski, an economist at ING Bank in Brussels, wrote in a note to investors.

Mr. Brzeski said that the E.C.B. would continue to offer assurances that it remains ready to take action if necessary. “The ECB will continue talking the talk in order not to have to walk the walk,” he wrote.