Econintersect: The authors of an IMF article argue that the ECB must take action to stop the downward trend of inlfation in the euro zone before the region finds itself in a repeat of the Japanese experience. The authors aay that a combination of actions should be considered: further cuts in the policy rate (currently 0.25% for refinancing operations, 0% for overnight deposits by banks and 0.75% for overnight loans by the ECB to banks); and increase the ECB balance sheet through LTROs (long-term refinancing operations) or QE (qualitative easing).
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Source:
- Euro Area — “Deflation” Versus “Lowflation” ( Reza Moghadam, Ranjit Teja, and Pelin Berkmen, IMF Direct, 04 march 2014)
