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ECB forecasts no deflationary pressure in the short term

In a move which has been welcomed by investment markets around Europe, the ECB (European Central bank) has confirmed that in its opinion the Eurozone is not at risk of deflationary pressure over the next few months. As we covered on a recent post, deflation is a very serious situation which can in some circumstances lead to a severe recession. As prices continue to fall, companies look to cut costs, unemployment goes up and there is even less money for consumers to spend.

The ECB also confirmed forecasts that base rates will fall by 0.5% by the end of the year in an attempt to refloat all of the European economies and strengthen the worldwide economy. Never before has the ECB taken such a major role in an economic cycle which is a reflection of the added power and control afforded from the EU members.

In due course many people believe that the ECB will take a role similar to the Federal Bank in the US and control interest rates across Europe. Recent comments regarding the Eurozone from the ECB have been fairly stark, honest and highlighted the difficult situation at the moment.

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