The writer is head of western European economics at JPMorgan
For the past decade, inflation outcomes in the eurozone have persistently undershot the objective of the European Central Bank.
Put differently, output and employment have been lower than they needed to be to deliver on the ECB’s self-defined measure of price stability. Those losses are material in themselves, even if they were not to continue in the future.
But they also leave a legacy of wider budget deficits, higher debt stocks and lower inflation expectations than would have been the case had the price stability objective been met. That legacy makes future losses of output relative to the economy’s potential more likely.
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