ECB to Invite Oil Decline into Stimulus Debate

Mario Draghi and his colleagues are about to debate whether cheaper energy is a blessing or a curse.

When the European Central Bank president convenes his Governing Council this week, the 24 policy makers will have to judge how the plunge in oil prices will affect inflation expectations in the euro area and what they should do about it. Crude’s biggest drop in three years, after OPEC opted not to reduce a supply glut, puts downward pressure on consumer prices that are already close to stagnating.

German council member Jens Weidmann signaled how oil is now a focal point in the quantitative-easing debate when he said last week that the drop in energy costs is like a mini stimulus package, suggesting no need for the ECB to expand its current measures. The opposing view, previously argued by Draghi and ECB Chief Economist Peter Praet, is that temporary price shocks can deliver lasting harm to an economy as feeble as the euro area’s.

Bloomberg

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