Inflation Is Like Banging on a Bottle of Ketchup, Sentix SaysBy
With the euro-area economy in strong shape and no end in sight for expansionary monetary policy, a concern has been raised that inflation may prove hard to keep under control.
Sentix, which measures investor confidence in the region, said on Monday that its gauge rose to the highest level since before the global financial crisis. With an index for the global economy at similar elevations, it also issued a warning:
“With such a strong economy, however, the question still arises as to whether the central banks, in their expansive stance, are not seriously going ‘behind the curve’ and stimulating monetary policy for too long.”
The European Central Bank seems less concerned by such a scenario, arguing that its accommodative policy must remain intact given inflation rates aren’t yet showing the same strong upturn as the rest of the economy. Sentix suggested it could be in for an unpleasant surprise:
“Ultimately, it could be like inflation with ketchup from the bottle: you must knock on the bottle for a long time, until the ketchup comes. But when it comes, then quite violently.”