ECB’s Inflation Challenge Looks More and More Like the Fed’s

by Mark Schroers
Yahoo! Finance, Canada

(Bloomberg) — The uptick in euro-zone inflation is increasingly drawing comparisons to the US — fueling concern that the European Central Bank could face similar impediments to lowering interest rates as the Federal Reserve.

While there have been clear differences in the drivers of price growth either side of the Atlantic – a point ECB officials repeatedly stress — some economists see important parallels and warn against underestimating the risk of more persistent pressures.

Thursday’s widely telegraphed reduction in the deposit rate from a record-high 4% isn’t in question. The danger is that stubborn inflation akin to that in the US makes rapid subsequent moves less likely. The Fed has already had to rethink monetary loosening after price gains surpassed expectations, even if traders are still hopeful of a rate cut this year.

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