ECB President Sees Rising Deflation Hints QE

European Central Bank President Mario Draghi said he can’t exclude the risk of deflation in the euro area, hinting that the likelihood of large-scale quantitative easing is increasing.

“The risk that we don’t fulfill our mandate of price stability is higher than it was six months ago,” Draghi said in an interview with German newspaper Handelsblatt. “We are in technical preparations to alter the size, speed and composition of our measures at the beginning of 2015, should this become necessary, to react to a too-long period of low inflation. There’s unanimity in the ECB council on that.”

While policy makers agree in principle, the debate over whether fresh stimulus is needed at this point has reopened a rift on the ECB’s Governing Council that now comprises 25 officials after Lithuania joined the currency region on Jan. 1. With inflation seen turning negative this year, some have warned of a deflationary spiral, as others have urged waiting to allow previously agreed measures to show their effect.

via Bloomberg

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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