Eurozone Needs Substantial Stimulus

Substantial monetary stimulus is still needed to bring inflation in the eurozone back to the European Central Bank’s target of almost 2%, the ECB’s chief economist said in a newspaper interview published on Saturday, investing.com reported. “A substantial stimulus is still necessary,” Peter Praet told Belgian newspaper De Tijd. “Everyone agrees that we have to make sure that the reduction of the stimulus takes place in an orderly manner, without any excessive shocks.” He later added: “If inflation becomes too high, we will react just as ruthlessly as we are now in order to get inflation back on track.” After buying more than €2 trillion ($2.38 trillion) worth of bonds since 2015, the ECB is expected to announce next month it will slow the pace of its purchases, since economic growth is accelerating and inflation is stable, albeit sluggish. Eurozone inflation is now reliably above 1%, and ECB President Mario Draghi said he expected it to reach the ECB’s target in 2020, after missing it since 2013.