Ligthart, Nick, Mody, Ashoka, (2016) ,”The ECB can make a difference if deeds match words”, Voxeu, 14 April
On 10 March 2016, ECB President Mario Draghi announced new measures to stimulate economic activity and raise inflation in the Eurozone (Constâncio and Draghi 2016b). The action was prompted by the worry that ‘core’ inflation, which strips out volatile food and energy prices, has remained stubbornly close to, or under, an annual rate of 1% since late-2013, well below the ECB’s goal of 2%. Indeed, the February reading of core inflation was 0.8% from a year earlier. A controversy has emerged. The ECB now blames the fall in commodity prices for the extended deflationary tendency in the Eurozone and believes that it must press ahead with more action (Constâncio 2016). But some commentators despair that ‘central banks’ have run out of ammunition to further stimulate the economy (Bini Smaghi 2016, El-Arian 2016). Since the US Fed is plotting its exit from monetary stimulus, the ‘lack of ammunition’ diagnosis presumably refers mainly to the Bank of Japan and the ECB. So, what is the ECB’s challenge – overcoming the drag from commodity prices, or creating new ammunition?
Relevant Posts
- Fratzscher, Marcel, Gropp, Reint , Kotz, Hans-Helmut, Krahnen, Jan , Odendahl, Christian, Weder Di Mauro, Beatrice, Wolff, Guntram B., (2016), “Mere criticism of the ECB is no solution”, Bruegel, 10 April
- Probin, Jayson, (2016), “Where next for the ECB?- Part 1: Why Draghi’s ‘Big Bazooka’ isn’t quite as big as it appears”, OpenEurope, 31 March