Draghi Says ECB Ready to Act on Deflation

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.

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