Critics of the Federal Reserve’s relatively loose monetary policies over the last few years have a tricky example to deal with in the euro zone: The European Central Bank, the euro’s equivalent of the Fed, has kept money relatively tighter, and inflation has cratered out — slipping to basically nothing in the past few months:
In case you needed a reminder, here’s how that’s working out for them. GDP growth:
And European banks are extending less and less credit, while the still-loose Federal Reserve is seeing credit growth in the U.S. So the ECB, which has been committed to inflation restraint (and bailing out periphery countries) above encouraging growth, is now considering ways to loosen its policies in order to avoid deflation, a seriously damaging state to which they’re drawing closer every day.