Inflation: The price is a blight

WHEN central banks adopted “quantitative easing” (printing money to buy financial assets) and other unorthodox means to buoy economies holed by the financial crisis, many feared that the result would be out-of-control inflation. Asset prices have certainly soared. But consumer prices have not. Indeed, the growing fear is that rich countries may be entering a twilight zone of ultra-low inflation.A downward lurch has been most notable in the euro area, where annual inflation dropped from an already low 1.1% in September to 0.7% in October; a year ago it stood at 2.5%. It is now a percentage point lower than the European Central Bank’s inflation target of “below but close to 2%”. The ECB lowered its main policy rate to 0.5% in May; on November 7th its governing council, responding to the weak inflation figures, reduced the interest rate further, to 0.25%.Elsewhere, too, inflation is low and falling. Almost five years after the Federal Reserve led the way with quantitative easing, inflation is well below the Fed’s 2% target (which relates to a somewhat broader measure of consumer prices than the better-known consumer-price index). In August this wider measure stood at…

Link to article: www.economist.com/news/finance-and-economics/21589439-rich-world-and-especially-euro-zone-risks-harmfully-low-inflation?fsrc=rss|fec

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