Draghi Determined to Avoid Deflation

The European Central Bank posits that an inflation rate of just below 2% is low enough for the economy to enjoy the benefits of price stability while also providing an adequate margin to avoid deflation.

But the eurozone still has a relatively long way to go to reach the central bank’s inflation target. In October, the single-currency region registered an inflation rate of only 0.1%.

In a Nov. 20 speech in Franfurt, European Central Bank President Mario Draghi sounded determined to get the inflation rate higher.

Here’s an excerpt from a Nov. 20 Reuters article:

The European Central Bank is ready to act quickly to boost anemic inflation in the euro zone, its president said on [Nov. 20], offering the strongest hint yet that the bank will unveil fresh stimulus measures at its Dec. 3 meeting.

Mario Draghi highlighted changes to the ECB's asset purchase program and deposit rate as possible tools to stop inflation from falling further below its target of just under 2 percent.

Draghi said the risk had increased that the ECB would miss that target. "If we decide (on Dec. 3) that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible," he told a conference in Frankfurt.

Draghi said the strength of the euro zone's recovery was modest and the global outlook for demand, particularly in emerging countries, had worsened significantly in recent months.

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