Slowing price growth in Europe is likely to reverse, according to a senior European Central Bank (ECB) official, who said the central bank is ready to tackle any possible disinflation.
“We don’t see it as a very likely prospect that disinflation would worsen in the euro zone as growth recovers, which is our main scenario,” Benoit Coeure, an executive board member of the European Central Bank told CNBC in an exclusive interview on Tuesday .
“Inflation will pick up gradually and will come back to the 2 percent target of the ECB.”
(Read More: ECB’s Draghi: Nothing new on negative deposit rates)
The ECB has warned of deflationary pressures – when the price of goods and services start to decrease. The danger is people expect falling prices and become reluctant to spend and borrow. That would make it hard to get the economy moving again.
It has yet to materialize but disinflation – when price growth stops increasing and decreases – has been seen in recent figures.
The ECB announced on November 7 a quarter-point cut in its main refinancing rate to a new record low of 0.25 percent. It followed surprisingly low inflation data which sparked concerns that the 17-country euro zone was heading for a period of deflation.
Coeure’s belief that inflation will pick up again correlates with the market view, with a Reuters poll predicting that the first estimate of inflation data this month, published on Friday, will show a slight upward movement to 0.8 percent from 0.7 percent.
Nonetheless, Coeure added that the Bank is ready for any alternative outcome.
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