News in Brief: ECB, China's economy, Brexit, UK economy

News in Brief

ECB under mounting pressure to step up eurozone support

The European Central Bank is under growing pressure to step up support for the eurozone’s flagging economy after the bloc slipped back into negative inflation in February 2016.

The surprise drop in prices marked the third time in a year that inflation has turned negative, fanning fears that the eurozone is headed for all-out deflation – a sustained period of falling prices.

The news cemented market expectations that the ECB would use its meeting next week to inject fresh cash into the single currency bloc and to cut a key interest rate further into negative territory, reported the Guardian.

Headline inflation dropped to -0.2% in February 2016, down from 0.3% in January 2016, according to an early estimate from statistics office Eurostat. That contrasted with forecasts for a reading of zero in a Reuters poll of economists.

China's central bank attempts to boost economy with cash injection

China’s central bank has stepped up action to bolster its cooling economy by loosening the rules on banks’ cash reserves in the hope that they will offer cheaper loans.

By cutting the reserve requirement ratio (RRR) – the amount of cash that banks must hold as reserves – the People’s Bank of China has in effect injected £72bn ($100bn) of long-term cash into the economy, experts said.

The central bank hopes its cut, effective from 1 March 2016, will boost liquidity in the financial sector, following signs that the world’s second-biggest economy is continuing to slow, reported the Guardian.

Osborne wins US backing in pushing Brexit onto G20's top risks

Chancellor George Osborne pushed financial leaders from the top 20 economies to include the risk of Britain leaving the European Union in their list of dangers to the world economy, gaining explicit support from the United States.

Britons will vote in a referendum in June 23 2016 on whether to remain part of the 28-nation EU, reported Reuters.

British Prime Minister David Cameron negotiated a special status for Britain in the bloc last week to help convince eurosceptics that continued membership was more beneficial than leaving.

The risk of Britain exiting the EU, dubbed "Brexit", was not in the original draft of the communique of finance ministers and central bankers of the top 20 economies, but was added on the insistence of Britain, G20 officials said.

UK economic growth still in the doldrums

Growth in Britain's private sector remained subdued in February 2016 after falling to its slowest rate in nearly three years in January, a survey showed, adding to signs of a slowing in the country's economy.

The Confederation of British Industry (CBI) said its monthly growth indicator - based on surveys of manufacturers, retailers and services - edged up to +8 from +6 in January 2016 but was below its levels throughout all of last year and 2014, reported Reuters.

"The British economy has made a slow start to the year, and growth has remained in the doldrums in February," said Rain Newton-Smith, the CBI's director of economics.

"With global risks increasing this year following the volatility seen in financial markets, businesses will be keeping a close eye on any possible impact on domestic activity."

Britain has grown more strongly than almost all other rich economies over the past couple of years but growth slowed towards the end of 2015.