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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