Is inflation (really) dead?
After central banks in the industrialised countries were struggling with high
inflation rates for roughly three decades following the suspension of the gold
standard in 1971, inflation seems to have disappeared on the heels of the global
economic and financial crisis.
In Europe, the ECB actually justified its non-
standard policy measures of asset purchases and a reduction in the deposit rate
to -0.4% as a tool to prevent the euro area from slipping into a detrimental
deflation scenario. Although even the ECB meanwhile acknowledges that the
threat of deflation is gone, it nonetheless decided in October to extend its
expansionary stance to September 2018 or beyond, voicing concern that
inflation is still too low and is, from its perspective, not expected to reach its
target – of below, but close to, 2% – until end-2019 at least.
The average of the inflation rate is 1.6% for Q4/2019, according to the ECB’s staff macroeconomic
projections.
EU Forecast
euf:ba18h:135/nws-01