ECB Vice President Luis de Guindos urged that Eurozone shouldn’t for Japan’s footstep that led to persistently low inflation. He said “we have learned from the experience in Japan that it is possible to get caught in a vicious cycle of declining inflation expectations, falling inflation and a binding lower bound on nominal interest rates from which it is difficult to escape.”
Finnish central bank chief Olli Rehn also urged to “take care to avoid the sort of harmful equilibrium that arises from prolonged low inflation and zero interest rates, as this would significantly constrain the capacity for monetary policy to balance the economic cycle.” And, “this would bring about a lengthy shortfall in economic growth with respect to its potential and hinder efforts to boost employment.”
At the same even in Madrid, de Guindos also warned that markets could be under pricing risks of no-deal Brexit. He said “We have not gauged so far the impact that Brexit is having (…) I think we are really underestimating the impact of the present uncertainty and that’s why I have fears, concerns that the impact of a disorderly Brexit would be much higher than the one that they (markets) are discounting now.”
