Sound bites: High Eurozone unemployment, falling inflation and flaccid recovery point to super-accomodative ECB policy for years.

If the ECB were to adopt a formal process of forward guidance for monetary policy, then Eurozone rates should be going lower and the ECB should be engaging a mass monetisation of Marshall Plan style proportions to get the Eurozone back to work. The ECB is missing sustainable recovery by a very wide margin. It is true that Eurozone economic sentiment is picking up, but the recovery is very flaccid and the economy is only just emerging from six long quarters of deep recession. It could be at least five years before Eurozone growth is anywhere near to being back on its feet again. In the meantime, employment opportunities will continue to stagnate.  Eurozone unemployment at 12.1% shows that the real economy is in dire straights and underlines that the ECB must keep monetary policy super-accomodative for years to come. The ECB must ignore all siren calls from German Bundesbank hawks to normalise interest rates as soon as possible.  Lacklustre growth, ultra-high unemployment, falling headline inflation and negative credit expansion all add up to the ECB not doing enough to guarantee sustainable recovery for the Eurozone. Another rate cut or adopting formal quantitative easing remain the key policy options on the table. But it’s doubtful that the ECB have the courage to pick up the batten.