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Eurozone inflation falls to -0.3% in September 2020

Agence France-Presse

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Eurozone inflation falls to -0.3% in September 2020

People shop at an Esselunga supermarket in Milan's Famagosta district on April 30, 2020, during Italy's lockdown aimed at curbing the spread of the coronavirus. (Photo by Miguel MEDINA / AFP)

AFP

Policymakers worry about falling prices as they can encourage consumers to hold off making purchases in hopes they fall further, which can lead to a spiral of dropping economic activity, employment, and prices

Eurozone inflation fell deeper into negative territory in September, official data said Friday, October 2, amid plummeting demand due to the coronavirus crisis.

The European Union’s Eurostat data agency said inflation fell to -0.3% last month, a drop from -0.2% in August and way off the official target of just under 2%.

The descent into deflationary territory will put pressure on the European Central Bank (ECB) to draw up further stimulus measures, already at 1.35 trillion euros ($1.58 trillion), and should encourage governments to spend more.

Policymakers worry about falling prices as they can encourage consumers to hold off making purchases in hopes they fall further, which can lead to a spiral of dropping economic activity, employment, and prices.

Over the longer term, the ECB sees inflation averaging just 1.3% in 2022, still far below its target, which has triggered calls for reform.

ECB chief Christine Lagarde said on Wednesday, September 30, that the eurozone should have an inflation goal “that the public can easily understand” and is calculated in a way that better reflects people’s everyday lives.

Inflation in the 19-nation eurozone has stayed stubbornly low for years despite unprecedented economic stimulus from the ECB, keeping the target well out of reach and fueling calls for a rethink.

Pursuing a less strict inflation target would follow in the footsteps of the United States Federal Reserve which last month pledged more leeway, allowing inflation to rise above 2%. – Rappler.com

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