Inflation Explosion 2010 - 2012

pocketdooz

What are people's opinions on the future risk of very high inflation in this country?

Due to the very low interest rates and the amount of money pumped into the system by the ECB . . .

Thanks

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Hasschu

If the gov't was running surpluses instead of deficits and if there was no limit to the amount of debt the gov't could incur then we could expect inflation. We will be lucky to come out of this with a slow growth rate and with unemployment still high for a few years. The gov't will not be able to sell enough bonds to cause inflation in Ireland, the bond market will have a finite limit beyond which the gov't will find interest rates on gov't debt exorbitant. High unemployment puts a damper on inflation in Ireland and with the Eastern European members in rough shape the competition for jobs will be fierce which will keep Irish wages in check. And let us not forget the ECB operates out of Frankfurt which is the stable money capital of the world. To sum it up Ireland does not have the credibilty in world markets that would allow things to get out of control.

googlefan

The real worry is that our pace of recovery will be far slower than the rest of the EU. This will result in rate rises which are totally unsuitable from an Irish viewpoint.

This may result in a further property slide, and obviously less money in the average person's pockets to spend on goods and services. I feel this will result in low inflation levels for the medium term at least.

Économiste Monétaire

The reserves pumped into MFIs have near-zero velocity right now. Inflation for Ireland, given a period of secular deleveraging, isn't likely; money supply growth is still on a negative path. That said, the caveat of 'I have no idea what's going to happen in 2011-12' applies. Rising commodity prices and a serious dichotomy for monetary developments between the older and newer Eurosystem member states are the main issues for me. How Euro membership is bandied-about in cases like Iceland as some kind of political reward is disturbing—a single currency is not a panacea for economic crises.

A recent release on the Eurosystem's covered bond purchase program:
http://www.ecb.int/pub/pdf/other/monthlyreporteurosystemcoveredbondpurchaseprogramme200907en.pdf

silverharp

there is still a latent problem with the whole Eastern European banking system and by default the western banks that have lent the money. I'd be surprised if it didnt blow up to some extent over the next 6 months. That will kick off more deleveraging and private deflation which I believe will always be more powerful then the official response.

Senna

(uneducated though)
Wont the price of oil have far more influence over inflation in the next few, than Europe's pace of recovery?