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24 Feb 2014
Flash: Deflation risks contained in EZ - RBS
FXStreet (Guatemala) - Analysts at RBS looked at recent inflation developments in the eurozone and suggest that deflation risks still appear relatively contained.
Key Quotes:
"Whilst it ‘feels’ as if we have never been closer to deflation than at any point in recent history, our analysis suggests that deflation risks still appear relatively contained. We argue that it would take another significant shock at least to push the eurozone into deflation".
"Still, for monetary policy makers this is insufficient as low inflation for a protracted period of time may cause inflation expectations to become unanchored".
"Repairing the damage afterwards is likely to be difficult and costly – as the Japanese would endorse.
"More “guidance” could prove the most effective instrument in the near-term before the ECB fires its heaviest artillery".
Key Quotes:
"Whilst it ‘feels’ as if we have never been closer to deflation than at any point in recent history, our analysis suggests that deflation risks still appear relatively contained. We argue that it would take another significant shock at least to push the eurozone into deflation".
"Still, for monetary policy makers this is insufficient as low inflation for a protracted period of time may cause inflation expectations to become unanchored".
"Repairing the damage afterwards is likely to be difficult and costly – as the Japanese would endorse.
"More “guidance” could prove the most effective instrument in the near-term before the ECB fires its heaviest artillery".