EU-28 and EA-19 HCPI
Inflation returned to the EU in May 2016, following two periods of deflation. EU inflation finished the year at 1.1% for the EU 28, and 1.2% for the EA19.
With existing interest rates at record lows, and with significant assets purchasing already in the system, Europe’s monetary policy strategy remains a cause for concern.
In March 2016 the ECB agreed that the interest rate on its main refinancing operations (MRO) – the open market operation that provides weekly liquidity into the Eurosystem – would be decreased by 5 basis points to 0.00% – with rates on the marginal lending facility falling to 0.25%, and to -0.40% on the deposit facility – with effect from 16 March 2016.
In addition, the ECB is set to increase QE (formally called APP – asset purchase programme) in the light of the weakening outlook for the global economy, and uncertainty concerning the possibility of the UK’s exit from the EU (‘Brexit’). Under its APP, combined monthly purchases of €80 billion assets will start in April 2016. This will be acccompanied by the launch of a new series of four targeted longer-term refinancing operations, starting in June 2016.
In December 2016 the ECB decided to continue its APP at a monthly rate of €80 billion until the end of March 2017, and from April 2017 this would be reduced to €60 billion until at least December 2017, assuming the inflation rate remained within it target range.
The Eurosystem offers credit institutions two standing facilities:
- Marginal lending facility in order to obtain overnight liquidity from the central bank, against the presentation of sufficient eligible assets
- Deposit facility in order to make overnight deposits with the central bank.
EU quantitative easing
EU monetary policy
Stagflation is a combination of high inflation, high unemployment, and stagnant economic growth. Because inflation isn't supposed to occur in a weak economy, stagflation is an unnatural situation. Slow growth prevents inflation in a normal ...
The laissez-faire economic theory centers on the restriction of government intervention in the economy. According to laissez-faire economics, the economy is at its strongest when the government protects individuals' rights but otherwise doesn't intervene. The ...
What Is Adverse Selection? Adverse selection is a term that describes the presence of unequal information between buyers and sellers, distorting the market and creating conditions that can lead to an economic collapse. It develops ...
Explaining The K-Shaped Economic Recovery from Covid-19 A K-shaped recovery exists post-recession where various segments of the economy recover at their own rates or levels, as opposed to a uniform recovery where each industry takes the same ...
Does Public Choice Theory Affect Economic Output? Both on paper and in real life, there is a solid relationship between economics, public choice, and politics. The economy is one of the major political arenas after all. ...
Largest Retail Bankruptcies Caused By 2020 Pandemic As we know at this point, the COVID-19 pandemic has thrown major companies in the US and the world over into complete havoc. Many have filed for bankruptcy, with an ...