Thursday, September 17, 2015

European Lowflation - The New York Times

European Lowflation - The New York Times:

"There is good reason to believe that the conventional 2 percent inflation target is too low, even for the United States; the risks of hitting the zero lower bound are clearly much higher than people believed when 2 percent became orthodoxy. But whatever the case for a higher US target, the case is much, much stronger for Europe, which combines Japan-style demography — a shrinking working-age population, making secular stagnation more likely — with adjustment problems that get much harder when inflation is low. It’s important to realize that it matters not at all whether the overall rate is slightly positive or slightly negative; as the IMF says, “lowflation” creates all the problems we associate with deflation, even if the headline number is greater than zero."

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