- ECB official
European Central Bank chief economist Peter Praet calmed down concerns about possible deflation in the Euro area, by saying that the risk of price deflation is limited, despite the fact that the Euro zone's consumer prices fell to the lowest level on record. Nevertheless, Praet highlighted that policy makers should be vigilant. In the meantime, surprising news came out from Germany, where import prices rose more than expected. Destatis reported a seasonally adjusted 0.3% increase in import price index in the last quarter, up from a 0.1% decline in the previous three-month period. On an annual basis, the index now stands at –1.3% compared with a consensus forecasts of –2.0%. While, the German economy is facing strong headwinds, European officials call for the German government to increase spending in an attempt to provide timely measures to the flagging economy. However, Germany is known for being an advocate of tight fiscal policy and structural reforms. As a result, the opposition is building between Germans and the rest of the Eurozone, with dangerously deteriorating relationship between ECB policy makers, namely: Mario Draghi and Jens Weidmann. German officials, including Chancellor Angela Merkel and Finance Minister Wolfgang Schauble do not support the central bank's measures, as they fear that once the ECB fails to spur lending and inflation in the Euro zone, it would be forced to deploy QE and start buying sovereign bonds.
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