Inflation slump could presage more eurozone stimulus

Annual inflation in the 19-country eurozone sagged further below zero in September, strengthening expectations that the European Central Bank will add to its emergency stimulus to help the economy through the pandemic

Via AP news wire
Friday 02 October 2020 10:05
Germany Daily Life
Germany Daily Life

Annual inflation in the 19-country eurozone sagged further below zero in September, bolstering expectations that the European Central Bank will add to its emergency stimulus efforts to cushion the impact of the pandemic on the economy

The consumer price index was down 0.3% in September, even lower than the minus 0.2% figure in August, according to official figures released Friday by the European Union statistics agency, Eurostat.

Excluding volatile food and fuel prices, inflation fell to 0.2% in September from 0.4% in August. The so-called core inflation figure is often considered the better measure of price movements in the economy as a whole.

Weak inflation can be a sign of economic weakness and is a major reason why analyst predict the ECB will add to its 1.35 trillion-euro ($1.6 trillion) program of regular bond purchases, which push newly printed money into the financial system. The purchases are intended to stabilize financial markets and keep credit flowing to businesses. The ECB's goal is to have annual inflation of just under 2%.

While low inflation can benefit consumers up to a point, ongoing weak prices can be a sign of slack in the economy. Low inflation can also make it harder for indebted countries in the eurozone to improve their competitiveness compared with the other members of the currency bloc.

ECB head Christine Lagarde gave little indication that more stimulus was coming at the bank's Sept. 10 meeting. The bank's 25-member governing council next meets on Oct. 29 and Dec. 10, although it can enact new measures at any time.