BRATISLAVA (Reuters) - Deflation risks in the euro zone have risen and a number of European Central Bank governing council members are prepared to take decisive steps if needed, ECB Governing Council member Jozef Makuch said on Tuesday.
Makuch said there was potential for the euro to weaken by the end of the year. The euro hit a session low of $1.3785 after his comments.
Makuch, who is also governor of the Slovak National Bank, said the ECB was preparing additional non-standard measures to avoid a deflationary environment.
“Regarding deflation in the euro zone, of course there are higher deflationary risks which we perceive in the ECB,” Makuch told a news conference.
“That is the reason why we are preparing additional non-standard measures ... to avoid getting into a deflationary environment.
“There are a number of members of the ECB council who are ready to take bold steps, of course, if needed,” Makuch told reporters after presenting a new inflation outlook for Slovakia.
Makuch said one possibility of further action was adding liquidity.
“The ECB has many options, of course one of them is adding liquidity to circulation,” he said.
“Which concrete tools will be used will depend on the circumstances when we are making a decision.”
The comments followed a softening of the stance by Germany’s Bundesbank.
Jens Weidmann, who is a member of the ECB’s Governing Council, told MNI in an interview published on Tuesday that the ECB could consider purchasing euro zone government bonds or top-rated private sector assets.
Makuch said the Slovak economy would welcome a weaker euro but added the ECB’s policy had to follow the interest of the entire euro zone.
Writing by Jason Hovet and Jan Lopatka; Editing by Alison Williams