MADRID, July 30 (Xinhua) -- Doubts about inflation among investors is one of the main reasons that the dollar and the euro are now worth almost the same on currency markets, economists said.
Pedro Aznar, Associate Professor from Esade Business school in Madrid, explained the energy crisis would "create higher inflation and harm economic growth," and the reluctance of the European Central Bank to raise interest rates meant the response to this crisis had been slow.
Aznar said there would be a knock-on effect where a weaker Euro would mean anything imported in dollars "will be more expensive," providing "an additional inflationary pressure."
He said hopefully increased pressure on the European Central Bank would lead it to increase interest rates as "the more it waits to do this, the more likely the euro will keep losing its value."
Kamal Romero from the University San Pablo, CEU, said that while predictions for economic growth in both the United States and Europe have "fallen in recent months," investors believe that Europe is going to find it harder to come out of the crisis, "due to the conflict with Russia and Ukraine."
"When uncertainly rises, investors try to avoid that by escaping to assets in other places," said Romero.
He said the euro has recovered slightly in the past two weeks, "which shows the uncertainty is less" but until there is a solution to the Ukraine conflict, there will continue to be pressure from hiking food and gas prices.
"We need more tools to combat inflation," he said. ■
