Thursday 26 April 2018

ECB warned over 'Japanese-style deflation'

Nobel prize-winning economist Paul Krugman. Photographer: Craig Ruttle/Bloomberg
Nobel prize-winning economist Paul Krugman. Photographer: Craig Ruttle/Bloomberg

Nobel Prize-winning economist Paul Krugman yesterday challenged the ECB to act to stop the eurozone slipping into Japan-style deflation and being "persistently depressed".

Speaking at the ECB's inaugural Forum on Central Banking, Krugman suggested the eurozone could sleep walk into Japan-style deflation.

It would be easy to convince oneself there is no problem, Prof Krugman said, adding: "There is not that explosive downward dynamics in the euro area, or in the United States.

"But then there has never been explosive downward dynamics in Japan either, and yet we do think that Japan has had a persistent deflation problem."

Opening the ECB's Sintra Forum, billed as the European version of the Federal Reserve's renowned Jackson Hole conference, Mr Draghi warned on Monday that there was a risk of disinflationary expectations taking hold.

Irish Independent

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