Draghi says Inflation Expectations Deteriorated across Euro Area

Draghi says Inflation Expectations Deteriorated across Euro Area

According to Mario Draghi, inflation expectations have gone down across the euro area. Draghi has passed signals that policy makers are all set to add fresh monetary stimulus.

He strongly indicated that the officials are still making efforts to stay prevented from Japan-style stagnation. The European Central Bank president told his international counterparts in Jackson Hole, Wyoming, yesterday that significant declines at all horizons have been exhibited in August by investor bets on euro-area inflation.

"The Governing Council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term", he said during a speech at the Federal Reserve Bank of Kansas City's annual economic symposium.

Draghi has made it very clear on previous occasions that increase in problems with the medium-term inflation outlook would lead the ECB to carry out broad-based asset purchases, or quantitative easing. It is predicted that the data will show decline in euro-area inflation by 0.3% this month, which is a fraction of the ECB's goal and the weakest since October 2009.

Increase in tension between Russia and some European countries over Ukraine have affected the economic prospects of euro zone. Citigroup Inc. economists have predicted that a one trillion euro ($1.3 trillion) package of broad-based asset purchases will be given in December.

The ECB's economic outlook is not similar to the US central bank. The US has made considerable recovery, but too many Americans are still jobless, Fed Chair Janet Yellen told the Jackson Hole conference. Quantitative easing was mentioned nowhere by Draghi during his speech. He instead talked about the actions that the ECB is already taking to improve the economy.

The ECB's Governing Council is set to meet on September 4 to take decision over monetary policy in Frankfurt.


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