Inflation? Deflation? ECB’s Current and Former Chief Economists Weigh in

The chief economist of the European Central Bank on Tuesday said falling prices rather than rising ones are more likely to result from the coronavirus pandemic that has been weighing on the global economy…

“I can imagine many firms that do face more costs,” said Philip Lane, speaking to an Institute of International Finance conference. “Of course, simultaneously they face a much smaller base as the demand levels come down.”

He said compressed profit margins are much more likely than price increases. “We don’t rule out seeing individual sectors having price increases. We’re sufficiently humble about the longer-term inflation outlook,” he said. “But mostly I think this is a negative period for the inflation path.”

At a separate IIF panel, former ECB chief economist Peter Praet agreed. He said it will take two years for GDP to reach prepandemic levels.

Now a senior fellow at the Solvay School of Economics and Management at the Université Libre de Bruxelles, Praet said households will…

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