Should the ECB move to halt inflation?

Inflation in the Eurozone rose considerably in December. The EU's statistical office Eurostat announced on Wednesday that consumer prices were 1.7 percent higher than a year ago. This is the highest rate of inflation since September 2013, prompting some journalists to call for an end to the ECB's expansive monetary policy. Others say such a move would have disastrous consequences.

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Neue Zürcher Zeitung (CH) / 05 January 2017

Cut off the supply of cheap euros

The ECB must counter rising inflation in the Eurozone with a change of policy, the Neue Zürcher Zeitung urges:

“This trend is making the extremely expansive policy of the European Central Bank (ECB) increasingly questionable. As recently as December the ECB extended its bond-buying programme of billions of euros without any apparent need to do so in order to bring inflation closer to the medium-term target of just under two percent. The programme, which was supposed to end in March, was prolonged until at least December 2017. This means the financial markets will be flooded with even more money and the debt policy of the states will be even more heavily subsidised. … Savers in particular are the victims of this disastrous monetary policy, which for far too long has been mainly an indirect state financing policy. It is no longer just the record-low nominal interest rates but also the rising rate of inflation that is devaluing their savings .”

Avvenire (IT) / 05 January 2017

ECB must not yield to Berlin

In Italy's interests the ECB should not change its course yet, Avvenire warns:

“Without doubt German savers will demand this. The low nominal interest rates combined with rapidly rising inflation rates will result now and in the future in a marked decrease in the real value of their assets. … This will no doubt prompt Angela Merkel to exert all her political influence to put an end to the expansive monetary policy. Should the deflationary trend continue in Italy, however, there is the risk that real interest on debt will rise while the cushioning effect of the ECB's bond-buying programme on nominal interest rates grows weaker or disappears entirely. In this situation the ECB's independence and autonomy from Berlin will once again be put to the test. Will the ECB act in the average interest of all the countries of the Eurozone or will it yield to the interests of the latter's leading economy, Germany?”

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