Decline in inflation in Europe worries the European Central


The inflation rate in the euro area turned negatively last month for the first time since May 2016, increasing the chances of the European Central Bank pumping more stimulus for the rise of prices that had not reached the target set for more than seven years.

The annual inflation rate in 19 euro-trading countries fell to -0.2 in August from 0.4 in July, below analysts’ expectations of a 0.2 percent reading, and well below the European Central Bank’s target of slightly less than 2 percent. And policy makers are concerned about the collapse of core inflation, which indicates that the deepest recession in the bloc’s living memory is not only a temporary shock, but may prove that its impact on consumer prices will be greater and extend for a longer period.
Inflation, which excludes more volatile fuel and unprocessed food prices and is closely monitored by the bank, fell to 0.6 percent from 1.3 percent, while a narrower measure that excludes alcohol and tobacco fell to 0.4 percent from 1.2 percent. The two are far from analysts’ expectations.
“The deflationary effects of the crisis cannot be avoided, at least in the coming quarters,” said Frederic Doucrosette of Best State Wealth Management.
“We stick to our expectation that the European Central Bank will raise … the emergency procurement program for the pandemic again by 500 billion euros, probably in December,” he said.
Energy prices tumbled 7.8 percent year-on-year in August, after falling 8.4 percent in July. Non-industrial goods prices also fell 0.1 percent, following a 1.6 percent increase in July.


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