Around the world, the indicators leave no room for talk of an upswing.”In the U.”But with Germany distracted by its election, the European Central Bank required by its statutes to fight any sign of inflation, and the straitjacket of the EU’s Stability Pact requiring euro countries to cut their budget deficits, stimulus packages look politically unlikely. and above automobile bearing suppliers all Europe must help the Japanese out of the deflation spiral by supporting them in their efforts to lower the yen. As studies like the Boskin report have shown, the method of price measurement overestimates the actual price level by about one-half to a full percentage point.
One of Germany’s top economists is warning the country’s leading bankers that Europe, and the rest of the world, are in dire danger of following Japan into a deflationary depression — far more serious and prolonged than a conventional recession.
This means the price level in the U.FRANKFURT, Germany, Sept. The central bankers either lack the means or the conviction to cut interest rates. The stars are all aligned, fears the top economist of Germany’s biggest bank, for a very dismal economic outlook., bearing in mind the current account deficit, can scarcely afford a significant effective appreciation of the dollar, the EU will have to permit its own currency to gain more strength.
That signals a particular need to stimulate domestic demand by interest rate cuts. The economy is in a downswing, as declining capacity utilization and increasing unemployment show., consumer price inflation is running at just barely 1 percent. pattern almost down to the decimal point and domestic demand is even more sluggish, particularly in construction and retail sales.