I don’t get it. What will it take for the European Central Bank (ECB) to take action against the rising threat of deflation?
The threat is real enough: consumer inflation is now at a lowly 0.5%, far lower than the bank’s target of 2% in the medium term.
And yet, ECB President Mario Draghi decides to wait it out. He didn’t change any benchmark rate nor did he announce any other measure. All he did was talk things up. Again.
This time, as was widely expected, he used the Easter excuse. While it’s true that a late Easter might have kept prices subdued in March (prices were not bumped up for the festive period), the point to note here is that without an Easter, prices are sliding. An Easter push would have been nothing more than temporary relief.
To be honest, Draghi’s repeated comments about being “ready to act” are starting to sound a little hollow now.
The big takeaway, it seems, from Thursday’s press conference is that quantitative easing ‘was discussed’ by the central bank.
But that was it.
I still believe some easing measures are coming, but boy, are they taking their time. Seriously, Draghi needs to pick up the pace before he starts losing credibility — and lose the chance altogether to prevent deflation.