Eurozone Inflation Sinks to 1.2%: ECB Declares "Substantial Progress"

One has to wonder what alternate universe the ECB resides in, for multiple reasons.

Mission Accomplished - Not

“We cannot yet declare ‘mission accomplished’ on the inflation front, but we have made substantial progress on the path towards a sustained adjustment in inflation,” Praet, considered a dove on the rate setting Governing Council, said ECB Chief Economist Peter Praet in Paris on Thursday.

Substantial Progress?

The ECB's target is two percent.

Progress in Pictures

ECB Expectations vs Reality

Economist Daniel LaCalle posted an interesting graphic in a Tweet a couple of days ago. I asked him for a higher resolution copy and he sent this.

Alternate Universe Progress

For the last 18 months, the ECB has made negative progress vs its stated goals, even with energy costs soaring.

The second reason the ECB resides in an alternate universe is that there is no benefit from inflation.

No Economic Benefit to Inflation

BIS Deflation Study

The BIS did a historical study and found routine deflation was not any problem at all.

“Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the study.

It’s asset bubble deflation that is damaging. When asset bubbles burst, debt deflation results.

Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

ECB and Fed policies have blown massive bubbles, making matters far worse.

Mike "Mish" Shedlock

Comments (15)
No. 1-15

Their aim is strictly aimed at governments' perspective... to make it possible to keep deficit spending going via inflation. Looks like it's game over for them. Mish, you need to post an article on the changing LIBOR reporting practices and proposed changes. OTOH, maybe you did and I missed it.


Demographics are poor, truly turning Japanese. What happens if they just let it happen? High # of zombie corps. Clear out of banks and zombies may be needed but demand is demographic related. Very export dependent so if exports are hit, local demand weak, it's game over.


There are no better doublespeakers on the planet than the European, EU, ECB elite.


Edward s Herman, in "Beyond Hypocriscy"
"What is really important in the world of doublespeak is the ability to lie, whether knowingly or unconsciously, and to get away with it; and the ability to use lies and choose and shape facts selectively, blocking out those that don’t fit an agenda or program."