Whatâs Going On Here?The rate at which the prices of goods and services increased in the eurozone â a.k.a. inflation â rose by slightly more than expected in June, but the blocâs central bank shouldnât celebrate just yet⊠What Does This Mean?Juneâs eurozone inflation was 0.3% compared to the same month last year â a pickup from Mayâs four-year low. That suggests growth might be returning, which should be good news for the economy. But there was cause for concern: price rises in the services industry â bars, restaurants, and so on â lagged those of food, tobacco, and alcohol. Thatâs worrying because services make up over half the eurozone economy, and âsupplyâ â space, reservations, and the like â will be tight as the bloc tries to reopen safely. Economists will be watching closely, then, to see whether a much-hoped-for increase in demand drives future price hikes. Why Should I Care?The big picture: Low inflation ainât so bad.
As far as the European Central Bank (ECB) is concerned, inflation at any level is better than deflation, which could send the eurozone on a downward spiral from which it may never recover. But itâs not out of the woods yet: inflationâs been below the ECBâs previous 2% target for seven years now, and the bank doesnât expect it to rise much above zero until next year, as coronavirus leaves lasting effects on unemployment and, in turn, consumption.
Zooming out: Low inflation really ainât so bad.
People are drawn to investing when inflation is high because it helps protect the value of their money from being eroded over time. Thatâs no truer than in Zimbabwe, where inflation hit 786% in May â its highest in ten years â and locals fled to the domestic stock market in their droves to protect their cash. And on Sunday â seemingly with no explanation â the government shut the countryâs stock exchange down, leaving folks unable to get their money back out. | 