Inflation Slides In Euro Area, Sparking Debate About Additional Stimulus

inflation

Global investors are paying close attention to latest  inflation figures from the Euro area for signs that declining inflation levels could push Euro economies in the 18 member currency bloc ever closer to deflation and lead the European Central Bank to take more accommodative measures to raise inflation and help stimulate growth.

Next Thursday central bankers from the European Central Bank will convene and decide whether the time is right to provide additional monetary stimulus measures to help revive growth and increase inflation levels in the euro economies.

The unemployment rate in the Euro area is 11.5 percent.

Today a flash estimate of Euro area inflation from Eurostat showed that Euro area inflation for November is expected to be 0.3 percent, meeting consensus estimates, but dropping below October’s 0.4 percent.

By contrast in October 2013 inflation was 0.7 percent in the Euro area.

Falling oil prices and weaker growth in Germany are some of the reasons that inflation continues to slide.

Last Friday the Euro plunged and European stock indexes rallied after ECB President Mario Draghi pledged that the ECB would do whatever it takes to help increase inflation across the 18 member euro area currency bloc that is faced with sluggish growth, and high unemployment.

“For our part, we will continue to meet our responsibility – we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us” Draghi said.

“If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialise, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases” Draghi added.

-Johnathan Schweitzer

 

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