Azerbaijan, Baku, 14 February / corr Trend A.Badalova / All else equal, a recession in the US should help Euroland contain inflation, Stephen Jen, the Executive Director and Senior Currency Economist of the British bank Morgan Stanley, told Capital Trend on 14 February.
Recently, the inflation ratio in Euroland countries has reached its record level, exceeding 3.1% in December. The increase of inflation in Europe was caused by high oil prices and sharp increase in the food prices.
The main channel of transmission is not the trade, but the financial markets. Financial market volatility, either through equity markets or credit markets, typically translates from the US to the European markets with the immense intensity, Jen said.
According to Jen, if the United States slows, so will Euroland. This prospective slowdown should help Euroland contain inflation, though at the outset, the inflationary pressures may linger for several months before falling.
That will be the difficult time that the ECB will be looking at the highest inflation and weakened growth
At the beginning of the week, the Euroland finance ministers stated that the record growth rate of inflation poses serious threats, though being a temporary manifestation, Reuters reports. They concluded that the recession does not threaten European economy and therefore, there is no sense to enhance it through the cut in taxes or rate -as the United States does.
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