Monday 29 February 2016

ECB Could Take Action on Low Inflation, Says Bank of France Governor–Report

In World Economy News 29/02/2016

European_central_bank_ECB
The European Central Bank could take action as falling oil prices weigh further on stubbornly low inflation, Bank of France Governor François Villeroy de Galhau told German daily Frankfurter Allgemeine in an interview.
Mr. Villeroy de Galhau said that sliding oil price could have a long-term impact on economies in the eurozone and lead to slower wage increases.
“Temporary falling oil prices alone are not a sufficient reason. But if the low energy prices have sustainable long-term effects, we have to act,” he said. “That seems to be the case, but we will see in March,” he added.
If needed, the ECB could accelerate its bond-purchase program, currently running at 60 billion euros ($66 billion) a month, Mr. Villeroy de Galhau said.
“We are ready to act, but we will have to see the economic data first,” he said.
Inflation in the eurozone was 0.4% in January and is expected to fall below zero over the coming months, far below the ECB’s target of just under 2%.
ECB governors from across the eurozone will meet in March to decide whether to adjust interest rates or extend a scheme known as quantitative easing, creating money to buy government bonds in a bid to revive inflation.
The ECB disappointed investors in December with an expansion of its stimulus that fell short of expectations, driving stocks lower and the euro higher against the dollar. The new measures included a reduction in the already negative deposit rate-charged to banks for storing funds at the central bank-a six-month extension of its bond-purchase program and a decision to reinvest principal payments on the bonds it holds.


Source: Dow Jones