dimanche 11 janvier 2015
Anxiety rises over eurozone’s falling prices, but Draghi’s hands may be tied
Posted on 04:21 by nice news
Prices are tumbling, right across the eurozone. But for consumers from Amsterdam to Athens, this is not a bumper Christmas sell-off: the falling cost of their weekly shop reflects a deep economic malaise.
After Brussels statisticians announced last week that inflation had been negative in December, with prices falling at an annual rate of 0.2%, experts warned that without drastic action the eurozone may be sliding towards a Japanese-style deflationary slump.
“This move in December is significant,” said Janet Henry, European economist at HSBC, “because it’s the first time that inflation has been negative since 2009 – in the depths of the crisis – and it’s going to turn further negative in the next few months.”
News that the long-predicted onset of deflation had arrived – aided by the recent sharp drop in oil prices – will intensify the pressure on Mario Draghi, president of the European Central Bank (ECB), to press on with quantitative easing – one of the few tactics available to central bankers hoping to reflate the economy when interest rates are already on the floor. But some experts have little confidence that even a large-scale intervention will do much good.
“I think they’ve left it a bit too late to do anything about this,” says Russell Jones, of Llewellyn Consulting. “What took them so long? This has been building, and getting more and more embedded in people’s expectations.”
Economists don’t generally worry too much about short periods of deflation, particularly if they are caused by external factors –such as the plunging oil price. Cheaper energy boosts demand by putting more money in the pockets of consumers in oil-importing countries.
But there have long been concerns that in the eurozone, where growth is weak and a number of countries remain in recession, falling prices could become
After Brussels statisticians announced last week that inflation had been negative in December, with prices falling at an annual rate of 0.2%, experts warned that without drastic action the eurozone may be sliding towards a Japanese-style deflationary slump.
“This move in December is significant,” said Janet Henry, European economist at HSBC, “because it’s the first time that inflation has been negative since 2009 – in the depths of the crisis – and it’s going to turn further negative in the next few months.”
News that the long-predicted onset of deflation had arrived – aided by the recent sharp drop in oil prices – will intensify the pressure on Mario Draghi, president of the European Central Bank (ECB), to press on with quantitative easing – one of the few tactics available to central bankers hoping to reflate the economy when interest rates are already on the floor. But some experts have little confidence that even a large-scale intervention will do much good.
“I think they’ve left it a bit too late to do anything about this,” says Russell Jones, of Llewellyn Consulting. “What took them so long? This has been building, and getting more and more embedded in people’s expectations.”
Economists don’t generally worry too much about short periods of deflation, particularly if they are caused by external factors –such as the plunging oil price. Cheaper energy boosts demand by putting more money in the pockets of consumers in oil-importing countries.
But there have long been concerns that in the eurozone, where growth is weak and a number of countries remain in recession, falling prices could become
Anxiety rises over eurozone’s falling prices, but Draghi’s hands may be tied
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