Europe

keeps hitting roadblocks on its way to economic recovery from the coronavirus pandemic. Yesterday’s macroeconomic data showed that annual inflation in the eurozone plunged to minus 0.2% in August, marking a slide into the negative territory for the first time in four years, and unemployment rose slightly to 7.9% in July.

• Rising pressure: Inflation in the area has been persistently under the European Central Bank’s target rate of 2% since 2013, except for a brief period in 2018. In time, a low inflation environment can suppress consumer spending, wages and productivity growth.
  
• Policy implications: The ECB is having its next policy meeting on September 10, but a change in monetary policy stance seems unlikely. Benchmark interest rates are already at or below zero percent, the emergency asset purchase program was recently expanded, and officials appear to be comfortable with the current stance.
  
• In quotes: “As long as the baseline scenario remains intact, there is no reason to adjust the monetary policy stance,” said Isabel Schnabel, a member of the executive board of the ECB, in a recent interview with Reuters.
  
• In other news: The euro climbed above $1.20 for the first time since 2018 on Tuesday, adding to the continent's economic woes. If the currency keeps appreciating, it could hurt the continent’s exports and increase deflationary pressures.
  
• It’s not you, it’s me: The euro’s upsurge is partially caused by a weakening dollar. The dollar index, which measures the greenback’s relative value compared to six other major currencies, has been hovering around 93 since late July, marking two-year lows.