Europe shouldn’t worry about inflation

Christian Odendahl

Inflation is no near-extinct tortoise that suddenly reappears unprompted. Nor is it a short-term
fluctuation in the prices of certain goods and services during a disruptive pandemic. Inflation is a general
rise in the level of prices in response to underlying economic forces such as employment, growth, the
economic expectations of people, and policy-makers’ actions. For central bankers, inflation is a useful
thermometer for the economy: if it is too low, it points to a cool economy that has unused capital or
labour that can be put to use; if it is too high, it shows that demand is higher than capacity, which drives
up prices too fast. A steady and predictable inflation of 2 per cent is ideal for Europe.


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