Goldman Sachs - ECB has more time to remain accommodative

Goldman Sachs - "Our analysis suggests that the rise in core inflation since the middle of 2010 is not a worrisome sign that the ECB has underestimated the underlying inflationary pressure in the Euro area. Indeed, to the extent that it reflects a weakening in the Euro area economy’s sensitivity to growth, it should allow the ECB to remain accommodative for longer than would otherwise be the case. This is because inflationary pressures resulting from stronger growth will also arise later than previously.
It will, however, remain crucial for the ECB to be seen as credible in its commitment to price stability. A reduced sensitivity of inflation to growth also implies that it may be more difficult to re-anchor inflation expectations – it would take a bigger recession to bring down inflation and consequently expectations – if expectations were, for whatever reason, starting to drift higher. Thus, a rise in inflation expectations would need to be dealt with in a rather aggressive way and the extra room to support activity could rapidly disappear."

Views: 42

Tags: ECB, Goldman Sachs

Comment

You need to be a member of Forex Social Network to add comments!

Join Forex Social Network

Members

© 2014   Created by FXStreet.

Badges  |  Report an Issue  |  Terms of Service

Offline

Live Video