![]() ![]() The idea that falling prices are bad for the economy is ridiculous. “The ECB was right to take out an insurance policy against it,” he adds, referring to measures including interest rate cuts the central bank took this month. “Even if you think the probability of damaging deflation is low, if it were to happen it’s a disaster,” says Erik Nielsen, global chief economist at UniCredit, the Italian bank. Deflation would also raise the real value of Italy’s monumental €2.1tn public debt load, causing angst among investors. They have been more focused on – and fearful of – the worst case: that the country, along with the eurozone more generally, could fall into a deflationary spiral, in which consumers hold off purchases in the expectation that prices will fall even further. But policy makers – particularly Mr Draghi and other ECB officials – do not seem to be betting on the resurgence of the Italian consumer. The hope is that lower prices will start luring Italians back to the shops. Matteo Renzi, the youthful prime minister who gained power in February with an agenda of radical economic and political reform, acknowledged last week that growth would in fact be “around zero” this year. Deflation is now stalking the home of Rome-born Mario Draghi, the European Central Bank president, who has sounded the alarm about the need to restore growth across the continent and has taken aggressive and unorthodox measures to do so. ![]() ![]() The appearance of deflation in Italy suggests a worrying spread from Spain, another peripheral eurozone economy, where it reared its head this year. Eurozone Policymakers Concerned About Falling PricesĪ Financial Times headline portrays falling prices as a negative thing: Deflation Takes Shine Off Sales for Italy’s Shopkeepers. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |