4th April 2014

Low inflation in the eurozone, talks about quantitative easing intensify

The Eurostat announced on 31 March the monthly inflation for the eurozone. It reached 0,5%, even less than the February 0,7% and the lowest level since 2009. According to the ECB, such low inflation rates are risky as deflation becomes ever more probable. In reaction to the announcement, the governing council of the ECB on 3 April kept the main interest rate at the record low value of 0,25%. ECB president Mario Draghi said that if inflation does not move towars the 2% ECB goal, the central bank will further lower the benchmark interest rate. Furthermore, the central bankers have already discussed the possibility of quantitative easing if the risk of deflation persists. Quantitative easing, known as “money printing”, injects large sums of money inside the economy, thus pushing consumer prices upwards. It is considered to be a last resort option and mainly the German Bundesbank is very much opposed to such measure. However, Draghi added, that the April inflation is expected to rise a little, compared to March, due to the Eastern holidays which tend to increase demand and therefore rise consumer prices.

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Members of the American Chamber of Commerce in the Czech Republic