Italian Central Bank Criticizes ECB Says Deflation is Near

The euro zone is on the brink of deflation and the European Central Bank’s credibility is at stake over its ability to meet its target for consumer price rises, the deputy governor of the Bank of Italy said on Wednesday.

The warnings by Salvatore Rossi are starker than the tones normally used by ECB officials, who tend to play down the risk of deflation.

“The euro zone is on the brink of deflation,” Rossi said in a speech at Verona university. He noted the overall inflation rate in the currency bloc of just 0.4 percent in October and that only two of its 18 countries had inflation above 1 percent.

Rossi said the problem was to a large extent due to weak demand and there was a risk that long term inflation expectations would become “unanchored.”

“The ECB’s credibility in meeting its price stability goal is at stake,” he said. The ECB aims for consumer price inflation below but close to 2 percent.

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