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Data points to euro zone staying below ECB comfort zone

Data points to euro zone staying below ECB comfort zone


Data points to euro zone staying below ECB comfort zone


LONDON (Reuters) – Financial data points to euro zone inflation staying well below the European Central Bank’s preferred level of just under 2%, the bank’s chief economist Philip Lane said on Wednesday.

Lane said there was no evidence that deflation was becoming a risk again in the 19-country bloc, but inflation was seen staying ultra low.

“The most recent financial data says there is a lot of weight attached to mediocre inflation outcomes, inflation outcomes between 0 and 1.5%, below the aim of the ECB,” Lane said at an event at the London School of Economics.

Earlier ECB President-in-waiting Christine Lagarde told a European Parliament hearing that the current challenges meant a prolonged period of highly accommodative monetary policy remained necessary.

ECB sources told Reuters on Tuesday that policymakers are leaning toward a new stimulus package that includes an interest rate cut, a beefed-up pledge to keep them low and compensation for banks hurt by the side-effects of negative rates.

Many also favor restarting asset buys, a significantly more powerful weapon, but opposition from some northern European countries is complicating this issue, the sources, added.

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