Risk of social crisis explains the difference in inflation strategy between the US and the eurozone – Natixis

The fight against inflation is much softer in the eurozone than in the United States because of the risk of a social crisis, analysts at Natixis report.

The US government and central bank are not afraid of a social crisis

“The US strategy is to rapidly reduce inflation, whatever the cost of this strategy (loss of household purchasing power, increase in unemployment), and this strategy can be implemented due to the lack of risk of a social crisis even if households suffer from this policy of rapid inflation reduction.”

“The eurozone’s strategy is to reduce inflation very slowly, with the ECB hiking interest rates slowly and household purchasing power being boosted by fiscal deficits.”

“The reason for this difference between the strategy of the US and the eurozone is fear in Europe of a social crisis if household purchasing power declines or if the unemployment rate rises.”