Benoit Coeure, an executive board member of the ECB, told the Nikkei newspaper that euro zone growth was low due to the lack of bank credit and certain government budget cutting. The bank did raise its outlook for inflation due to the higher oil prices, but believes inflation will not have a long term impact.
Inflation could be a problem over the long term it oil prices kept going higher in conjunction with higher wages. This is commonly known as second round effects. Coeure said in an interview on Sunday that “there are good reasons to believe that second-round effects will be limited.”
Many analysts worry that a big recession in Europe could affect the recovery of the global economy. The increase in oil prices have also raised fears of slowing down the global recovery. Oil prices have jumped in recent weeks as tensions between the Western world and Iran have grown. The price of oil is currently sitting around $107/barrel. Oil prices could jump even more as summer approaches which traditionally sees oil prices go higher as more people drive.
Overall the U.S. stock market recovered quite well late last week after the Dow lost more than 200 points on Tuesday. Positive economic news has prevented stocks from having a pull back.
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