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).
Wednesday, March 5, 2014
From the IMF:
So, another scandal strikes the UMP. After the accusations against Copé, who allegedly sent inflated invoices to a consulting firm run by cronies of his, now we have recordings of private meetings made by ex-Sarkozy advisor Patrick Buisson--the man who directed the UMP's veer to the extreme right--leaked to the press. Who did it, and why? If Buisson himself leaked the tapes, what was he trying to accomplish? To embarrass Sarkozy? Nothing terribly embarrassing has leaked out yet, other than the existence of the tapes themselves. But perhaps these first leaks are a warning shot across Sarkozy's bow. Stay out of politics--or else. Whose interests would that serve? The suspects are legion.