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Stark, Jürgen

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Financial Times - United Kingdom | 14/04/2014

Unnecessary panic-mongering over deflation

In recent weeks calls have increased for the ECB to do more to counter the threat of deflation in the Eurozone. But warnings of dropping price levels are just undue pessimism, the former chief economist at the ECB, Jürgen Stark, writes in the liberal business paper Financial Times: "With the economic recovery in the eurozone stabilising, and leading indicators pointing upwards, the most likely medium-term scenario is stable prices and a modest upturn over the next two years. No further action by the ECB is required. Any further action would be of questionable impact, and would lead to an unjustified ultra-loose monetary policy stance for too long, with unintended medium-term consequences. Moreover, it would dramatically complicate the exit from low interest rate and liquidity-providing policies."

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