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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