Brussels, 16/05/2014 (Agence Europe) - The European Central Bank is fine-tuning the measures to be introduced early next month to tackle persistent low inflation in the eurozone.
“We have reaffirmed our forward guidance and stressed that we are determined to act swiftly if required and do not rule out further monetary policy easing”, said Vitor Constâncio, European Central Bank vice-president, at a Europe-Asia economic forum in Berlin on 15 May.
The ECB may introduce negative interest rates for bank deposits and may launch a mass capital injection programme, LTRO, while forcing banks that benefit from this to lend money on to European business and small business. The launch of a public and private asset purchase programme is a longer-term option.
Before it introduces non-conventional measures, the ECB wants updated annual eurozone inflation figures, which may show a deterioration, and “has stood at rates of between 0.5% and 0.9% since October last year. We expect euro area inflation to remain low for a prolonged period”. Constancio said inflation was not due to reach the ECB's target of just under 2% until the end of 2016. This prolonged period of low inflation is hampering recovery.
Constancio said that the ECB “still sees no distinct signs of deflation in the euro area for the time being” for three reasons: “First, long-term inflation expectations remain well anchored, according to measures extracted from both financial instruments and surveys. Second, the lower inflation rates in the euro area can in large part be explained by global factors, in particular with regard to energy and food prices. Third, there is no evidence so far that economic agents are postponing expenditure plans, which is sometimes seen as an indication of deflation”. In fact, polls show that consumer confidence is at its highest level since 2007.
The EU's statistical office, Eurostat, says that prices have fallen in seven EU member states: Greece (1.6%), Bulgaria (1.3%), Cyprus (0.4%), Hungary (0.2%) Slovakia (0.2%), Croatia (0.1%) and Portugal (0.1%). (MB)