Draghi sees risk of deflation in the European Union
President of the European Central Bank, Mario Draghi, did not rule out the possibility that the European Union fall into deflation. PRESS / FILE
President of the European Central Bank (ECB), Mario Draghi, said he can not exclude the risk of deflation in the euro zone, a sign that increase the likelihood of a relaxation quantitative scale.
A key meeting
Asked about the likelihood that the region fall into deflation, a spiral of falling prices it makes households postpone spending, Mario Draghi said ?? risk can not be completely excluded but is limited ?? and ?? must act to counter that risk ??.
?? The risk that fulfill our mandate of price stability is more ?? higher than six months ago, Draghi said in an interview with the German newspaper Handelsblatt. ?? We are conducting technical preparations for changing the size, speed and composition of our measures in early 2015, if this is necessary to react to a too long period of low inflation. There is unanimity on this in the ECB board ??.
Draghi rarely gives interviews to the media and his statements reflect his interest in convincing critics of quantitative easing in Germany, the largest economy in the Eurozone. The debate about whether it is necessary to provide more encouragement reopened a crack in the Governing Council, while Bundesbank President Jens Weidmann argues that today no justification to give more encouragement and others warn that inflation expectations too low could hold.
?? has been proven time and again that traditional hawks who wanted to continue using standard monetary policy instruments after the worst financial crisis in eighty years were wrong ??, said Holger Schmieding, chief economist Berenberg Bank in London. ?? Instead of inflation and moral hazard as the dreaded result of some non-standard policies, the euro area is closer to deflation ??.
The yield on Italian and Spanish bonds fell to then record lows Draghi’s comments and the euro weakened more than ever in four years. The single currency fell 0.5 percent to $ 1.2048 at 10:31 Frankfurt time. The yield on Spanish government debt to ten years fell eight basis points to 1.53 percent
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