Dear Mario Draghi: About Your Victory Over Deflation Speech in March

Mish

In March, ECB President Mario Draghi declared victory over deflation. Let's take a look at Eurozone inflation since his victory speech.

On March 10, 2017, I reported ECB Declares Victory Over Deflation: Hallelujah!

My lead-in comment was "ECB President Mario Draghi Declares Victory Over Deflation. That’s much like shouting hallelujah when you miss the game-winning field goal."

In the Eurozone, consumer price inflation is measured by the Harmonised Index of Consumer Prices (HICP). Harmonized means all the countries in the Eurozone use the same methodology. HICP is essentially the same as the CPI in the US.

Core HICP excludes food, energy, alcohol, and tobacco. In the US, core CPI excludes food and energy.

It's been seven months since Draghi's victory speech. Let's investigate details from the October Fash Estimate of Eurozone HICP.

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Year-over-year Inflation in services is down from 1.5% to 1.2%. The core HICP is down from 1.1% to 0.9%. Thus most of the decline in the core is due to a drop in the rate of inflation in services.

Mario Draghi, like his counterparts at the Fed, are not pleased with such results. Like all economic illiterates, the Central Banks are happiest when your money decreases in value every month.

Meanwhile, consumers are happy to see prices decline. It takes years of brainwashing to believe rising prices are a good thing.

Mike "Mish" Shedlock

Comments (5)
No. 1-5
madashellowell
madashellowell

When inflation of real wages outpaces inflation of our necessary expenses, maybe then I will applaud.

JimK
JimK

HICP did drop month-to-month, but Year-over-year (Oct 16 to Oct 17) both core and overall indices ticked up 0.1 %. You're comparing the wrong columns for year-over-year change.

Stuki
Stuki

@madashellowell :The progressive "solution" to that is simple: Just keep ratcheting down what is considered "necessary," with "hedonic adjustments" and other nonsense. It sure ain't the 40 acres and a mule from back in the civilized era any longer.

Bernie
Bernie

Quite the opposite! SuperMario is quite satisfied with this low inflation expectations (...but not so low for the real people with declared wages). If inflation goes too high too fast he couldn't wait any further to rise the rates and to stop buying bonds. What he wants is to continue to provide free lunch for his friends the super-wealthy

Bernie
Bernie

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