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Thursday, September 06, 2012

Draghi Takes 'A Step in the Right Direction'

Paul Krugman:

Draghi: ...I guess I’d better weigh in on what would, if it weren’t for the DNC, be the story of the day: the latest announcement from the European Central Bank.
What I’ve been arguing for a while is that saving the euro requires two things: (a) large ECB purchases of peripheral bonds (or at least a declared willingness to do so, to cap yields), and (b) an indication that the ECB will be willing to allow higher inflation to make adjustment possible.
It looks as if we sorta kinda got (a), although the details are hard to interpret. Nothing on (b) yet, and market indicators of inflation expectations are still too low.
So, a step in the right direction, probably enough to buy a significant amount of time, but not enough unless more follows.

[Greg Ip comments here.]

    Posted by on Thursday, September 6, 2012 at 06:34 PM in Economics | Permalink  Comments (38)


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