WASHINGTON (Reuters) - European Central Bank policymaker Jens Weidmann said on Friday he saw no risk of a growth-destroying deflationary spiral taking hold in the euro zone, adding that the bloc’s economy would pick up and therefore cause the inflation rate to gradually rise.
Euro zone inflation is running at 0.5 percent - well below the central bank’s target of close to but just below 2 percent. The ECB’s latest staff forecast said inflation in the bloc would rise to 1.7 percent in the last quarter of 2016.
“Nothing in the euro zone suggests we will see a self-reinforcing downward spiral of falling prices and wages,” Weidmann said on the sidelines of an IMF meeting in Washington.
“The risk of broad-based deflation in the euro zone is therefore very low.”
Weidmann said the ECB had made clear it would react to an extended period of very low inflation with unconventional monetary policy measures but at the moment there was “no reason to be more expansive”.
Any unconventional monetary policy measures the ECB did use in the case of long-term low inflation would have to fulfill many conditions, he said.
Reporting by Gernot Heller in Washington; Writing by Michelle Martin in Berlin; Editing by Stephen Brown