The European Central Bank has hinted that it is poised to launch a programme of quantitative easing – that is printing money to stimulate economic growth.
Mario Draghi, the central bank’s president, said the risk of deflation was greater than six months ago and signalled his intention to press ahead with the stimulus.
Interviewed by the German financial newspaper Handelsblatt, Draghi said: “The risk that we do not fulfil our mandate of price stability is higher than six months ago.
“We are in technical preparations to adjust the size, speed and compositions of our measures in early 2015, should it become necessary to react to a too long period of low inflation. There is unanimity with the governing council on this.“
His words helped push the euro to a four-year low against the dollar. It fell as low as $1.2014, its lowest level since June 2010.
The bank is hoping that a rise in central bank liquidity, along with lower oil prices, will provide the impetus to kickstart growth in the eurozone.
Draghi’s words were backed up by the central bank’s chief economist Peter Praet, who last month said the prospect of deflation was real during a “substantial part of 2015”.
While Germany’s Bundesbank has spoken out about the risks of quantitative easing, Praet was clear on what he felt was the next step for the ECB: “If we had had some interest rate margin left, there would have been a unanimous decision to cut rates,” and “if I were willing to cut rates if that had been possible, then I should not be paralysed by the fact that the only option is to buy sovereign bonds.”