FRANKFURT (Reuters) - European Central Bank President Mario Draghi said on Thursday euro zone consumer prices could continue to fall over the next couple of months before picking up slowly towards the end of the year.
Euro zone consumer prices fell for the first time in more than five years in December after a significant drop in oil prices and policymakers are increasingly concerned that such a development could unhinge consumers' inflation expectations.
"Annual HICP inflation is expected to remain very low or negative in the months ahead," Draghi said at a news conference following the ECB's monetary policy meeting. "Such low inflation rates are unavoidable in the short term given the recent very sharp fall in oil prices and assuming that no significant correction will take place in the next few months."
He said inflation was expected to increase gradually later in 2015 and in 2016 as the ECB's monetary policy measures support demand and assuming a gradual increase in oil prices.
The ECB expects inflation at 0.7 percent this year and at 1.3 percent in 2016 -- far below its target of below but close to 2 percent. The projections could, however, be revised downwards as they do not yet fully reflect the recent drop in oil prices.
Writing by Paul Carrel; Editing by Catherine Evans