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EU's Rehn worried about possibility of prolonged low euro zone inflation
April 1, 2014 / 6:47 AM / 4 years ago

EU's Rehn worried about possibility of prolonged low euro zone inflation

ATHENS (Reuters) - A prolonged period of low inflation in the euro zone would negatively affect the rebalancing of the economy, EU Economic and Monetary Affairs Commissioner Olli Rehn said on Tuesday.

European Economic and Monetary Affairs Commissioner Olli Rehn addresses a news conference on macro-financial assistance to Ukraine, in Brussels March19, 2014. REUTERS/Francois Lenoir

Preliminary data showed on Monday that consumer price growth slowed further in March to 0.5 percent year-on-year from 0.7 percent in February, increasing the risks of deflation.

The European Central Bank, which meets on interest rates on Thursday, wants to keep inflation below, but close to 2 percent over the medium term.

“I am concerned about a possibility of having a prolonged period of low inflation in the euro zone, because this would negatively affect the rebalancing process of the euro zone economy,” Rehn told reporters.

“On the one hand, it would obviously increase real disposable incomes, but on the other had it would have a slowing down effect o the rebalancing of the euro zone economy,” he said before a meeting of euro zone finance ministers.

The International Monetary Fund has repeatedly called on the ECB to either cut rates, or inject more cash into the economy through purchases of public and private assets.

Reporting By Jan Strupczewski

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