The European Central Bank (ECB) should hammer the urgency of rising deflation risk and lengthen the maturity of its asset purchases when it meets on Dec. 10, according to Robin Brooks, Chief Economist at the Institute of International Finance (IIF).
The Euro has shown remarkable resilience to rising coronavirus cases and negative inflation this quarter. EUR/USD currently trades above 1.21, representing a 3.32% gain for the fourth quarter. According to Brooks, the ECB needs to boost easing to match the Federal Reserve to stall the EUR’s deflation-importing rise.
The central banks should avoid talking about the exchange rate and focus on low inflation at its Dec. 10 meeting and avoid cutting the already-negative deposit rate.
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