Euro-zone lowflation: Getting the message

ON the eve of today’s monetary-policy meeting of the European Central Bank’s governing council, Christine Lagarde, managing director of the International Monetary Fund, called for “more monetary easing including through unconventional measures” in the euro area. Speaking today after the council had failed to follow her advice, Mario Draghi, the ECB’s president, said how “extremely generous” the IMF was in proffering such advice; and wondered whether it might extend the courtesy to other central banks, such as the Fed, the day before its policy committee met.  Tiffs apart, the ECB does seem to be getting the message even though it left interest rates, its conventional tools, unchanged today. With inflation dropping further in the euro zone to just 0.5% in March, Ms Lagarde had highlighted the emerging risk of “lowflation”. Mr Draghi said that the council was unanimously committed to using unconventional as well as conventional measures to “cope effectively with risks of a too prolonged period of low inflation”. With little conventional ammunition left, since the ECB’s main lending rate is already just 0.25%, he spelt out that the unconventional measures might include quantitative easing–buying assets with central-bank money–as well as charging negative interest rates on overnight deposits left at the ECB by banks.  Tackling lowflation in the euro zone is thus a …

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