FRANKFURT (Reuters) - European Central Bank vice president Vitor Constancio said on Friday the ECB was not complacent about the risks from a protracted period of low inflation and would act if necessary.
Speaking about challenges for global economic growth at a meeting of the Group of 30, Constancio said the global recovery remained fragile and risks loomed large, but that the global outlook had begun to improve.
Turning to the euro zone, he said there were encouraging signs that the recovery was gaining momentum, even though the pace of growth remained moderate.
The ECB saw “no distinct signs of deflation and economic agents are not postponing purchases”, Constancio said in the text of a speech.“ But we recognize that, if too prolonged, periods of low or negative inflation could unleash forces that may affect the outlook, by destabilizing inflation expectations and aggravating the burden of the debt overhang of both governments and households,” he added.
“At the ECB, we are ready to act to avoid low inflation becoming entrenched in a way that would destabilize the outlook for growth.”
ECB President Mario Draghi said after the ECB’s May meeting that the Governing Council was “comfortable with acting next time” - its June 5 policy meeting - but wanted to see updated economic projections from the bank’s staff first.
Governing Council member Ignazio Visco also said earlier on Friday that the central bank was ready to act if needed, adding that excessively low inflation in the euro zone - caused in part by a strong euro - should be dealt with as firmly as high inflation.
Reporting by Eva Taylor; Editing by Catherine Evans