Hollande’s inflation gaffe surprises economists

French President François Hollande congratulated the ECB for bringing inflation close to zero at a time when economists are criticising it for precisely that reason.

While the ECB aims to keep the inflation rate at just below 2%, it’s been well short of that for more than a year and fell below zero in December.

Hollande’s gaffe comes as the central bank considers massive government bond purchases for the first time to rectify the situation.

While low inflation boosts household’s real incomes, ECB president Mario Draghi is concerned falling prices could lead to consumers delaying their spending, pushing the euro-area economy into a deflationary spiral. The Governing Council will hold its next policy meeting on January 22.

“Growth is also what the ECB is after. In terms of inflation, it has attained its targets since it is almost zero today in Europe. I want to congratulate it on its action,” Hollande told French diplomats yesterday in Paris.

Hollande’s office in Paris didn’t immediately respond to calls for comment.

Bloomberg