Eurozone Deflation: Hiding in Plain Sight
Question: I have two questions. The first one is: do you see any risk of deflation in some countries in the euro area? […]
Draghi: […] First, on deflation: the price path that has been foreseen by the staff projections is lower than the price path foreseen in previous staff projections, both for this and next year. This is mostly due to a decrease in the price of oil. If you discount oil and food, you see that the difference between the two price paths, of the previous and of today’s projections, is much smaller. Second: is there deflation? We must first ask ourselves what deflation is. Deflation is a protracted fall in prices across different commodities, sectors and countries. In other words, it is a generalised protracted fall in prices, with self-fulfilling expectations. Therefore, it has explosive downward dynamics. We do not see anything like that in any country.
He waffles around a bit here, but he is clearly saying “no” to the risk of deflation, “no” to a “generalized protracted fall in prices” in any country. I know Eurostat is hard to navigate, but deflation is really not so hard to find: