Tuesday, April 14, 2009

Bad Comedy...

Ah...NOW deflation is a problem for the ECB. Good to know.
y Gabi Thesing
April 14 (Bloomberg) -- European Central Bank council
member Athanasios Orphanides signaled the bank may have to
continue easing monetary policy beyond next month to quell
deflation risks in the euro area.
“If inflation threatens to remain significantly below 2
percent for a considerable period of time, then additional
policy easing could be warranted to counter that eventuality,”
Orphanides, who heads the Central Bank of Cyprus, said in an
April 11 interview in Nicosia. “The risk of deflation has
increased somewhat in the past few months.”
ECB President Jean-Claude Trichet has indicated the central
bank will lower its key interest rate further from 1.25 percent
and announce additional non-standard measures next month to
counter the worst recession in over six decades. The ECB this
month cut the benchmark by a quarter point, less than economists
expected, and delayed a decision on new tools, fueling
speculation the 22-member Governing Council is split over the
best way forward.
Orphanides indicated he favors extending the ECB’s “policy
package,” which has so far consisted of rate reductions and
loaning banks as much cash as they want. Policy makers are
discussing extending the maturities of those loans and buying
assets, he said.
While he didn’t want to “pre-judge” the discussion,
Orphanides couldn’t rule out the ECB announcing purchases of
securities such as commercial paper as soon as next month.

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