The governor of the European Central Bank, Mario Draghi, speaking yesterday in the Economic and Monetary Affairs Committee of the European Parliament, in an unexpectedly strong statement said that the euro area is still open to “potential inflationary bubbles”. He then added that “the possible effects of Euro exchange rates on inflation must be monitored while banks need not only a strong single supervisory system but also common crisis resolution rules”. The members of the Committee observed that the banks need to increase lending to the real economy and the ECB has to look into that. Let’s follow the discussion.
Euro parities, however, with the major currencies like the dollar, the English pound and the yen have substantially strengthened during the past few weeks reducing imported inflation risks rather than increasing them. As a result, an interpretation of Draghi’s comments on potential inflationary risks in the euro area…
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