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Negative Inflation May Prompt ECB Stimulus Boost

Negative Inflation May Prompt ECB Stimulus BoostNegative Inflation May Prompt ECB Stimulus Boost

The European Central Bank is set to review its accommodative monetary policy in December. While the EU economic recovery is progressing moderately, the return of inflation is likely to take longer.

EU economic recovery is expected to gradually strengthen the impulse underlying the inflation process, ECB chief Mario Draghi said, NewsNow reported.

But the protracted economic weakness of the past years continues to weigh on nominal wage growth, and this could moderate price pressures.

After leaving interest rates unchanged last month, the ECB Governing Council discussed all possible policy tools, including interest rate cuts. Draghi strongly hinted that the ECB may boost its stimulus in December as policymakers are increasingly concerned over the persistence of negative inflation.

The ECB seems to be ready to deploy all its tools to maintain an appropriate degree of monetary accommodation.

In its latest World Economic Outlook, the IMF cut its growth projections for Germany, but retained the outlook for France. It forecasted Germany to grow 1.5% this year and France to expand 1.2%.

Britain’s unemployment rate fell to the lowest level since early 2008 and employment rose to a record in the Q3.The ILO jobless rate dropped to 5.3% in the September quarter from 5.6% in the previous three months. There were 1.75 million unemployed Britons in the third quarter, down by 103,000 from the June quarter.

The number of people in work surged by 177,000 to 31.21 million. Earnings including bonuses increased by a less-than-expected 3%, and that excluding bonuses grew 2.5%.

A marked rise in employment and fall in the unemployment rate points to a further tightening of the labor market, which is supportive to interest rates rising sooner or later.

 

Financialtribune.com