Wednesday, March 5, 2014

European Deflation?

From the IMF:
You can have too much of a good thing, including low inflation. Very low inflation may benefit important segments of the population, notably net savers. But in the current context of widespread indebtedness problems, it is working to the detriment of recovery in the euro area, especially in the more fragile countries, where it is thwarting efforts to reduce debt, regain competitiveness and tackle unemployment. The ECB must be sure that policies are equal to the tasks of reversing the downward drift in inflation and forestalling the risk of a slide into deflation. It should thus consider further cuts in the policy rate and, more importantly, look for ways to substantially increase its balance sheet, be it through targeted LTROs or quantitative easing (public and private asset purchases).

1 comment:

Mitch Guthman said...

What do the commie stooges at the IMF know? Everyone know that the current policies of the Troika are the keys to summoning the confidence fairy who will bring an unparalleled golden age!

Also, to summon the confidence fairy these sensible economic measures must be supplemented by everyone chanting “supply creates its own demand” three times after crucifying the social welfare economy on a cross of artificial gold.