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.
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.
ECB and Fed policies have blown massive bubbles, making matters far worse.
Mike "Mish" Shedlock