Economics
ECB’s Next Step Hinges on Who to Believe on Future Inflation
- Households are predicting that consumer prices will accelerate
- Investors say pandemic could push euro zone toward deflation
Photographer: Hannelore Foerster/Bloomberg
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The European Central Bank’s next move to cope with the deepest downturn in decades could turn on whether it listens more to consumers or investors about the risk of deflation.
Executive Board member Isabel Schnabel highlighted the dilemma last week when she noted that financial markets have been pricing in “significant risks” of a downward spiral in prices because of the coronavirus, while households expect just the opposite.