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ECB WARNS OF DEFLATIONARY PRESSURES IN EUROZONE.

The European Central Bank's chief economist said on Friday the eurozone faces deflationary pressures, and the bank's president stressed that interest rates must remain low because the economy is weak. With eurozone inflation running at 0.7 percent, well below its target of just under 2 percent, a raft of ECB speakers this week have said the bank is open to taking fresh measures to support the economy. Vice-President Vitor Constancio said on Tuesday everything is possible and both he and economics chief Peter Praet have said asset buying - or quantitative easing (QE) - is an option. But the ECB's conservative minority, which voted against this month's surprise cut in interest rates and are led by its German members, still seem dead set against any such move. Germany's finance minister also warned on Friday that the ECB's loose monetary policy risked giving some eurozone governments an incentive to slow their reforms.

Monetary policy may not replace the necessity of reducing deficits, fiscal discipline, he added at the European Banking Congress in Frankfurt.

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Publication:Pakistan & Gulf Economist
Date:Dec 1, 2013
Words:171
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