Fears are mounting that falling prices could devastate the economy after an early estimate showed deflation of 0.2 percent in August.
The EU statistics offices flash estimate on Tuesday adds to pressure on the European Central Bank, a week ahead of its next gathering to discuss monetary policy.
The ECB was already grappling with inflation well below its target of near 2 percent, let alone deflation. Modest price growth is seen as spurring economic activity. Analysts have warned that declining prices could push the already shrinking economy into freefall, as people see little point in buying goods that get cheaper by the day.
“This is massive,” Pictet senior economist Frederik Ducrozet tweeted after the data came out. “No way the ECB can ignore this.”
Economists were anticipating the central bank to wait until the fall before again increasing the size of its €1.35 trillion emergency pandemic bond-buying program, known as PEPP, to counter lowRead More – Source