Deflation Threatens Europe in 2015

Europea faces the threat of deflation in the new year, but Coutts Private Bank remains positive on the region and expects robust measures from the European Central Bank 

Coutts 6 January, 2015 | 2:40PM
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Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Alan Higgins, UK CIO for Coutts explains how Europe is confronting its deflation demons.

The threat of deflation has taken centre stage as 2015 gets under way. But a robust response from the Swiss National Bank (SNB) and expectations for more of the same from the European Central Bank (ECB) reaffirm our positive view on European assets in the year ahead.    

The SNB’s move to negative interest rates – announced in late December – shows the level of worry about deflation, a concern shared by eurozone policymakers. ECB President Mario Draghi rang in the new year by highlighting Europe’s fight against this risk, which he said “cannot be entirely excluded”, though “it is limited”. Draghi hinted that aggressive quantitative easing would be the weapon of choice, saying “we have to act against such a risk.”

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