Draghi: ECB aware of risks from persistently low inflation

Tue May 27, 2014 11:45am EDT
 
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By Eva Taylor

SINTRA Portugal (Reuters) - European Central Bank President Mario Draghi said on Tuesday the bank was aware of the risks from prices remaining too low for too long and the ECB was equipped to get inflation back to its target again.

Speaking at the ECB's inaugural Forum on Central Banking, Draghi said the ECB had the tools it needed to get euro zone inflation back to its target of below, but close to 2 percent. Inflation was 0.7 percent in April.

Draghi said price adjustments in certain euro zone countries were at risk of slowing and then getting entrenched.

"We are aware of the risks of a too prolonged low inflation period," Draghi said.

Speaking at the same conference on Monday, Draghi said the ECB must be "particularly watchful" for any negative price spiral in the euro zone, adding that the bank was not resigned to inflation being too low for too long.

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The ECB is especially concerned about difficult funding conditions for small- and medium-sized enterprises (SMEs), which Draghi said account for about 80 percent of employment in the euro zone.   Continued...

 
European Central Bank (ECB) President Mario Draghi addresses a news conference following the ECB Governing Council meeting in Brussels May 8, 2014.  REUTERS/Francois Lenoir