- Benoit Coeure, ECB Executive Board member
The European Central Bank may need to deploy additional measures to underpin prices, as inflation failed to recover as fast as policy makers has anticipated, Executive Board member Benoit Coeure said. The central bank may need to cut its deposit rate further from its current –0.2%, if inflation in the Euro region remains subdued for longer than expected. Markets are already pricing in a reduction to –0.3% when the Governing Council meets in December. Last week, ECB President Mario Draghi said declining inflation expectations, driven partly by lower-than-expected demand for oil, have forced the central bank to weigh a wide variety of possible measures, including a deposit rate cut.
In January, the ECB announced its plan to recover Euro zone's fragile economy by purchasing bonds worth 60 billion euros per month. The 19-month scheme is expected to inject 1.1 trillion euros into the stagnant economy until September 2016. However, a precipitous slowdown in China and other emerging markets, lower oil prices, soft inflationary pressures in the Euro zone and overall sluggish growth may force the central bank to consider additional steps to reach its inflation and economic growth targets.
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