ECB considers healthy levels of inflation just below 2%

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  • The ECB considers that the economy most are healthy levels of inflation just below 2%. From October 2013 onwards, inflation in the region remains under considered a "danger zone" level below 1%. Experts fear that the long period of low inflation will change the inflation expectations of consumers and make them slow their purchases waiting for lower prices. This may lead to deflation spiral, as in Japan.

    Printing money

    Since the ECB has no where to lower key interest rates, the bank is preparing a program to print money by buying government bonds on secondary markets. Injecting more money into the economy should increase demand and contribute to faster growth in prices. Most analysts expect this decision to be taken further at the next meeting of the ECB on 22 January. At the beginning of the year the institution's president Mario Draghi said he has already begun technical preparation of size, speed and design of measures that will be introduced shortly to respond to low inflation.

    On Wednesday, Eurostat published data on unemployment in November, which show a slight decline to 11.5% in the eurozone and 10% throughout the European Union. In the EU remain jobless total 24.423 million. People, of which 18.394 mln. In the eurozone. The highest unemployment rate remains in Greece and Spain - 25.7 and 23.9%, while in Bulgaria statistics recorded 11.1 percent.

    Obviously, the real fuel for the next big bull market will come from the deployment of all of this cash. It will come from investors and from companies. Investors and corporate executives need to get over their fears and feelings of uncertainty on the economy's future, and they will start to spend. The recent Eurozone debt problems have only added to the fear. But those problems will be backstopped soon and we can move on. The re-investment won't happen overnight and many investors and companies will take their time and will scale in slowly - but it will happen. The investors and companies that wait too long or that doubt every market rally will miss the next big bull run.