Eurozone inflation hovers over the 2% target

FACUNDO ARRIZABALAGA

A pedestrians walks past by a giant poster of a Euro coin near Waterloo in London, Britain, 24 January 2017.

Eurozone inflation hovers over the 2% target


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Annualized Eurozone inflation is nearing the European Central Bank’s target of 2% the first half of 2018.

If energy and process foods were taken out of the basket, inflation would stand at 1,2%; the rate would be lower still without tobacco. In sum, there is evidence that inflation is driven by energy and taxation rather than a genuine surge in demand.

However, the increase comes on the heel of the ECB announced that the €2,6 trillion bond-buying programme is coming to an end by December 2019. Still, Mario Draghi has made clear that ultra-low interest rates will remain at current levels at least until the summer of 2019.

According to an ECB “discussion paper” published on Wednesday, the massive stimulus programme has not actually contributed to inequality.

The frequent assumption is that the bond-buying programme would inflate the price of assets, particularly housing, increasing the income gap. However, by lowering the rate of inflation and stimulating growth, the study argues, the programme has been effective in stabilizing the increasing gap.

Employment has surged in the Eurozone, reaching record highs in Germany and lowering significantly in France, Italy, Spain, Portugal and Greece.

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