European Central Bank Governing Council member Christian Noyer said on Monday that interest rates have to remain low for an extended period and might go even lower if needed as officials try to ensure the euro zone does not fall into deflation.
Central bankers have to invent policies to achieve price stability if conventional monetary policy stops working, Noyer said, suggesting the ECB will keep its options open after a surprise slowdown in inflation.
“We see risks that low inflation will remain for some time,” Noyer said at a conference in Tokyo.
“We will keep interest rates low for an extended period, or even lower if need be, for price stability.”
ECB executive board member Benoit Coeure said disinflation in Europe is likely to continue for now, but will not progress to deflation because the economy is recovering and inflation expectations remain anchored around 2 percent.
A slowdown in inflation in the euro zone prompted the ECB to cut its main refinancing rate to a record low of 0.25 percent earlier this month. A more conservative minority at the bank voted against this move, raising concerns about a split within the bank.