Bruegel – Is there a deflation risk in the Eurozone?

This very detailed post by Bruegel offers a thorough look at the question whether or not there is deflation looming in the Eurozone. The conclusion is that the situation looks worrying.

Today, Eurozone inflation is at 0.5%, i.e. its lowest level since November 2009. Inflation expectations and inflation forecasts, including the ECB staff projections, do not suggest a quick return to an overall euro-area inflation rate that can be regarded to being close to two percent in the next few years. Despite this, the ECB has not announced any new measure since last November’s monthly press conference. Even though the euro area as a whole has not yet entered into deflation, this picture is worrying. Low inflation rates will make the relative price adjustment in the euro area more difficult, complicate debt deleveraging and put the sustainability of debt at risk. | Read more at Bruegel http://www.bruegel.org/nc/blog/detail/article/1293-is-there-a-risk-of-deflation-in-the-euro-area/

Today, Eurozone inflation is at 0.5%, i.e. its lowest level since November 2009. Inflation expectations and inflation forecasts, including the ECB staff projections, do not suggest a quick return to an overall euro-area inflation rate that can be regarded to being close to two percent in the next few years. Despite this, the ECB has not announced any new measure since last November’s monthly press conference. Even though the euro area as a whole has not yet entered into deflation, this picture is worrying. Low inflation rates will make the relative price adjustment in the euro area more difficult, complicate debt deleveraging and put the sustainability of debt at risk. | Read more at Bruegel http://www.bruegel.org/nc/blog/detail/article/1293-is-there-a-risk-of-deflation-in-the-euro-area/
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