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Defeating the deflation dragon (and other fairy tales)

| Posted by: Paul Donovan | Tags: Paul Donovan

  • ECB President Draghi indicated that he wished to take credit for defeating the deadly dragon of deflation in the Euro area. Deflation was never that credible a threat (one price falling when most other prices are rising does not constitute deflation). The signals are that the ECB will move to tighten policy next year, however.
  • The US employment report is something of a non-event, given that Fed Chair Yellen and other members of the FOMC are pretty clearly signaling an intention to tighten. Economists know that a single (much revised) figure does not signal an economic trend. Of course, that will not stop politicians exploiting the data.
  • South Korea's President Park has been impeached, necessitating elections within 60 days. North Korea has offered some harsh criticisms of the former president. This news is not unexpected and financial markets have reacted with appropriate calmness.
  • The EU heads of government summit reappointed one of the many presidents of the EU, but otherwise did not do very much. There was a commitment to free trade that would be heartwarming were it not for the fact that the UK (the major champion of free trade) is preparing to depart.