Europe Has A Serious Pricing Problem
This was also the tiniest increase in prices since October 2009.
"Looking at the main components of euro area inflation, services is expected to have the highest annual rate in July (1.3%, stable compared with June), followed by non-energy industrial goods (0.0%, compared with -0.1% in June), food, alcohol & tobacco (-0.3%, compared with -0.2% in June) and energy (-1.0%, compared with 0.1% in June)," said Eurostat.
The big risk here is that prices go negative, and Europe spirals into deflation, a phenomenon that perpetuates itself as consumer and businesses delay spending in anticipation of even lower prices.
Combined with the stubbornly high unemployment rate, this puts increasing amount of pressure on the European Central Bank to leverage monetary policy in an effort to stimulate economic activity and stoke inflation.
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