The European Central Bank (ECB) is alert to the risks posed by low inflation, and must be prepared to take action if risks surrounding weak price growth in the euro zone emerge, its president said on Monday.
“At present, our expectation is that low inflation will be prolonged but gradually return to close to 2 percent. Our responsibility is nonetheless to be alert to the risks to this scenario that might emerge and prepared for action,” ECB President Mario Draghi said in remarks prepared for delivery at a conference in Sintra, Portugal.
Euro zone inflation picked up in April, but remained below expectations, maintaining pressure on the ECB to stimulate the economy. Consumer prices rose by 0.7 percent year-on-year in April, marking an uptick from March’s 52-month low of 0.5 percent.
“Negative inflation rates might destabilize inflation expectations. And we know from international experience this change can happen quite quickly, especially if the objective of monetary policy is not clear,” he said.