Global Business and Economics Program Senior Fellow Megan Greene writes in the Sunday Business Post on how the European Central Bank will tackle low inflation:
The ECB didn’t take any action at its governing council meeting this past Thursday, but that does not mean nothing happened. ECB president Mario Draghi gave the clearest signal yet that the central bank is committed to using unconventional policies—including controversial quantitative easing (QE)—to address low inflation in the eurozone.
This is the first time the ECB has ever admitted to having serious discussions about QE. Draghi’s comments came off the back of an admission by the biggest opponent to QE—head of the German Bundesbank, Jens Weidmann—that such a policy might be necessary.
Weidmann’s admission flies in the face of German monetary orthodoxy. It is practically in the German DNA to be allergic to anything that might risk stoking hyperinflation. With Eurozone inflation decelerating to 0.5%–compared with a target of just under 2%–in March, hyperinflation is hardly a concern.