Their messages reinforced expectations for fresh policy action from the ECB after President Mario Draghi said last week the bank was considering new stimulus measures and would decide on the matter when it gets updated inflation forecasts from its staff in December.
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“The population is older, wealth is more unequal and balance sheets are so over-leveraged that central bank power is now asymmetric – they can’t boost growth by cutting rates to stimulate more leverage, but they can curb growth by not providing stimulus or worse still, raising rates too early”.
An index of executive and consumer confidence climbed to 105.9 from 105.6 the previous month, the European Commission in Brussels said on Thursday. That followed a survey of purchasing managers published last week that showed private sector activity picked up during the same month.
The youth jobless rate, which applies to those under 25 years of age, eased to 22.1 percent in September from 22.2 percent in August. The decline was driven by significant falls in Italy and Spain.
This postponement could signal two things: the recovery of the U.S. economy is still considered to be fragile and there is fear as to what would happen to consumption and investment if interest rates were to rise. In the US, the jobless rate was 5.1% in September. High levels of unemployment are an indication that the economy has a large amount of spare capacity, generating little pressure for prices to rise.
“I have always been an extreme critic of central bank policies, particularly of the Fed and the Bank of England with their negligent pursuit of ultra-loose money policy in the mid-noughties policies that ultimately proved ruinous in the 2008 Global Financial Crisis”, Mr Edwards said.
Even core inflation, which excludes volatile energy prices, rose to only 1.0 percent in October from 0.9 percent the month before.
So will low inflation be with us for a number of years to come?
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The European Central Bank wants to keep inflation below, but close to 2 percent over the medium term and launched in March a government bond buying programme to flood the euro zone economy with cash and in this way accelerate price growth, now stifled by the weak economic growth and very cheap energy.
