German Central Banker Reaffirms Deflations Risks Limited

The European Central Bank (ECB) reaffirmed that it is ready to use “unconventional instruments” if euro zone inflation remains stubbornly low, but also said the expectation is inflation will gradually rise over the future.

Bundesbank chief Jens Weidmann, who is also a member of the ECB’s governing council, played down any risk of deflation, putting the slowing price growth currently witnessed down to factors “outside” the ECB’s control.

“Mario Draghi made this point pretty clear in his last press conference. We do believe that the deflationary risks are pretty limited so we portray an outlook for the inflation rates that expects a gradual recovery and this recovery will also be reflected in gradually rising inflation rates,” Weidmann told CNBC.

“The governing council said if there is a too prolonged period of low inflation rates it will also consider unconventional instruments,” he said.

Hawkish Weidmann, who as president of Germany’s central bank sits on the ECB’s 24-member Governing Council, refused to go into detail on what kind of measures the bank would take in the event of prolonged low euro zone inflation and added the bank also needed to consider the limits of it mandate.

via CNBC

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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