Deflate-gate, European edition

It’s Super Bowl week, the official lead-up to the unofficial holiday that is America’s biggest game. But in Europe, they play a different kind of football, and they are in the midst of a different kind of “deflate-gate,” and one that may actually be worth the time we spend talking about it.

The euro is deflating faster than Tom Brady’s footballs. According to today’s flash estimate from Eurostat, euro area annual inflation is down to –0.6 percent. In response, European Central Bank president Mario Draghi has announced a €1 trillion bond purchase program to begin in March.

The program itself will consist of €60 billion in monthly bond purchases by the ECB through at least September 2016, though the ECB expects the program to continue until euro inflation rates are near 2 percent.

And that may not happen any time soon. Even Draghi, who is quarterbacking the program, doesn’t expect inflation to turn around in the near term.

“On the basis of current information and prevailing futures prices for oil, annual HICP inflation is expected to remain very low or negative in the months ahead,” Draghi said in the Jan. 22 press conference. “Such low inflation rates are unavoidable in the short term.” Draghi added that inflation rates are expected to increase gradually in the latter half of 2015 and in 2016, though time will tell to what degree.

After Sunday, those of us in the U.S. will hopefully (and thankfully) never have to hear about our deflate-gate ever again. Hopefully the euro’s deflate-gate doesn’t last much longer.

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ReggieClodfelter91x119Reg Clodfelter is a news reporter with Institutional Real Estate, Inc.