ECB Does Not See Risk of Deflation

The European Central Bank sees no current risk of deflation nor signs of people delaying purchases, policymaker Peter Praet said in a newspaper interview published on Tuesday.

Praet, who holds the economics portfolio on the ECB’s Executive Board, told Belgian newspaper De Standaard that persistently low inflation would represent a risk.

But this was at the moment being mainly driven by subdued food and energy costs. Energy prices are highly volatile.

“Weak demand and high unemployment could also be playing a role,” he said.

The ECB’s mandate is to deliver price stability, which it defines as inflation of close to but below 2 percent over the medium term.

Euro zone inflation is currently running at just 0.8 percent – well below target. “We accept that price developments are weak and that the weakness is continuing in the medium term,” Praet said.

ECB President Mario Draghi said the central bank had not changed interest rates this month because of the need for more information about the economic recovery, putting markets on alert for a possible move in March, when the region’s updated inflation outlook is due.

The ECB holds its next policy meeting on March 6.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza