Fall of Eurozone Consumer Prices Essay Example | Topics and Well Written Essays - 750 words

Fall of Eurozone Consumer Prices - Essay Example The region is just recovering from the economic depression that affected the entire globe. A major concern in the region was that consumers would opt to postpone spending on investment opportunities, as they fear the downward spiral into a full-blown economic depression. So what is the European Central Bank doing to prevent the region’s economy from experiencing the adverse effects of a fall in consumer prices? Mario Draghi, the President mentioned that the bank was set to convene a meeting in Frankfurt, Germany to discuss aggressive strategies aimed at containing the fall in consumer prices before it became unmanageable. In addition, he inferred that the rumoured onset of deflation was unlikely to happen; however, he did not rule it out completely. Among the possible intervention strategies the Bank was likely to take was quantitative easing, which is similar to that undertaken by the US Federal Reserve. Although controversial in the region, this strategy proved helpful in stimulating the American economy. Quantitative easing entails the process by which a country’s Central Bank injects money into the country’s economy with the intention of managing inflation by increasing spending by the private sector. In this case, the Europe an Central Bank would purchase financial assets such as government bonds using money it has creates. It is crucial to note that the money used in this process is not tangible money, as it is generated electronically. Arguments against the use of Quantitative Easing are as follows.