Coppola, F., (2013), “The ECB rate cut was driven by the needs of Germany, not the needs of the Eurozone”, LSE European Politics and Policy Blog, 19 Νοεμβρίου.
Earlier this month, the European Central Bank cut its benchmark interest rate to a new low of 0.25 per cent, down from 0.5 per cent. Frances Coppola writes that the rate cut is unlikely to offer any help to the struggling economies in southern Europe. She argues that the rate cut was framed largely around the interests of Germany, and that the actions the ECB really needs to undertake are politically impossible.
Consumer price inflation in the Eurozone has been below the target of 2 per cent and falling for quite some time. But until now, the ECB has been sitting on its hands. Inflation some distance below target didn’t appear to bother it – most likely because the (unbelievable) forecasts for Eurozone recovery created inflation expectations in the 1.5 – 2 per cent range, so it saw no need to act on what was assumed to be a temporary problem.
So why did the ECB, in a complete reversal of its previous stance, suddenly cut the interest rate to 0.25 per cent? Well, Eurozone consumer price inflation has touched a record low of 0.7 per cent, driven by falling energy prices and stagnant prices in other sectors. But inflation expectations are still where they were before, based on expectation of a strong Eurozone recovery.
Για όλο το άρθρο, πατήστε εδώ.
Σχετικές Αναρτήσεις
- Wolf, G., (2013), “Governments must follow the ECB’s rate cut with policy action”, Bruegel, 13 Νοεμβρίου.
- Wolf, M., (2013), “Why Draghi was right to cut rates”, The Financial Times, 12 Νοεμβρίου.
- Münchau, W., (2013), “Optimism about an end to the euro crisis is wrong”, The Financial Times, 27 Οκτωβρίου.
- Münchau, W., (2013), “The eurozone needs to get inflation up again”, The Financial Times, 10 Νοεμβρίου.
- Cohen-Setton, J., (2013), “Blogs review: The deflationary bias of Germany’s current account”,Bruegel, 06 Νοεμβρίου.