30 Jun 2014
ECB's Mersch: No acute risk of deflation
FXStreet (Bali) - ECB member Mersch crossed the wires over the weekend, saying that they see no acute risk of deflation, although he admits that the Eurozone faces the prospects of a long period of low inflation.
Mersch said, on comments made to Deutschlandfunk radio: "At the moment we see no heightened or acute danger of deflation, in the sense that consumers would change their behaviour and postpone making purchases because they expect prices to fall which would create a negative spiral causing more deflation."
"What we do see is a long period of very low inflation. When we have such low inflation then the risk is greater, that should the European economy suffer an unforeseen external shock again, we have no buffer," Mersch added.
On the possibilities of low rates being maintained until 2016, Mersch said: "If everything else stays as it is today then that could be the model. We as a central bank will try to fulfill our aim as quickly as possible, which is to bring inflation back towards the level of close to but below 2%. But this will take time because currency policy takes a while to work through the different economic structures."
Mersch said, on comments made to Deutschlandfunk radio: "At the moment we see no heightened or acute danger of deflation, in the sense that consumers would change their behaviour and postpone making purchases because they expect prices to fall which would create a negative spiral causing more deflation."
"What we do see is a long period of very low inflation. When we have such low inflation then the risk is greater, that should the European economy suffer an unforeseen external shock again, we have no buffer," Mersch added.
On the possibilities of low rates being maintained until 2016, Mersch said: "If everything else stays as it is today then that could be the model. We as a central bank will try to fulfill our aim as quickly as possible, which is to bring inflation back towards the level of close to but below 2%. But this will take time because currency policy takes a while to work through the different economic structures."