BERLIN, Jan 10 (AFP): ECB board member Sabine Lautenschlaeger has disputed in a magazine interview that the eurozone is now experiencing deflation and expressed scepticism about the central bank buying up sovereign bonds.
Markets surged this week as investors bet data showing prices fell year-on-year in the eurozone in December would push the ECB to launch massive purchases of government bonds, only to slump back on indications it may act cautiously.
"We are seeing persistent weak inflation, due to among other things the prices of energy and food having fallen sharply," Lautenschlaeger said in an interview with the weekly Der Spiegel due to hit newstands on Saturday.
The 0.2 per cent drop in consumer prices is the first fall in consumer price inflation in the eurozone in five years, and many analysts warn low energy prices could keep prices falling for an extended period.
Deflation is defined as an extended period of falling prices where consumers begin to put off purchases in expectation they will fall further, sparking a damaging cycle of falling production, employment and prices.
The ECB has been watching warily as inflation fell further away from its target level of just under 2 per cent last year as oil prices tumbled by half.
ECB chief Mario Draghi has said the central bank could launch a quantitative easing (QE) programme of purchasing government bonds like the US Federal Reserve did during the global financial crisis to protect the eurozone from deflation. Some analysts see the ECB as now having little choice to do so at its next meeting on January 22.
ECB board member rules out deflation in eurozone
FE Team | Published: January 11, 2015 00:00:00 | Updated: November 30, 2026 06:01:00
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