The European Central Bank has been preparing additional policy steps to guard against deflation taking hold in the euro zone as the strong euro weighs on prices, ECB President Mario Draghi said on Thursday.
The risks of deflation were “quite limited,” Draghi said in a speech at an award ceremony in Vienna, but the longer inflation remained low, the higher the probability of deflationary risks emerging.
“That is why the ECB has been preparing additional non-standard monetary policy measures to guard against such a contingency and why it stands ready to take further decisive action if needed,” Draghi said in the text of his speech.\
“Any material risk of inflation expectations becoming unanchored will be countered with additional monetary policy measures,” he added.
Draghi struck a more dovish tone than he did a week ago at his monthly post-policy meeting news conference, when he said there had been no reason for the ECB to act as the recovery was continuing and recent data had been by and large positive.
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