A FEW years ago, the news about the euro-zone economy was
uniformly bad to the point of tedium. These days, it is the humdrum diet
of benign data that prompts a yawn. Figures in November show that GDP
rose by 0.6% in the three months to the end of September (an annualised
rate of 2.4%). The European Commission’s economic-sentiment index rose
to its highest level in almost 17 years. Yet when the European Central
Bank’s governing council gathered on October 26th, it decided to keep
interest rates unchanged, at close to zero, and to extend its
bond-buying programme (known as quantitative easing, or QE) for a
further nine months.
The central bank said it would slow down the pace of bond purchases each month, to €30bn ($35bn) from January. But Mario Draghi, the bank’s boss, declined to set an end-date for QE. A hefty dose of easy money will be necessary, he argued, until inflation durably converges on the ECB’s target of just below 2%. It shows few signs of doing so, despite the economy’s strength. Underlying, or core, inflation, which excludes the volatile prices of food and energy, fell from 1.1% to 0.9% in October, according to data published a few days after the ECB meeting. The euro zone’s miseries of 2010-12 were unique. But in its present, happier state of vigorous activity, low inflation and easy monetary policy, it is like many other big economies.
