Euro Bears at Risk on Sticky CPI- Outlook Remains Bearish Below 1.10

DailyFX.com –

Euro-Zone Consumer Price Index (CPI) to Contract at Slower Pace.

Core Inflation to Hold Steady at Annualized 07% for Second-Month.

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Trading the News: Euro-Zone Consumer Price Index (CPI)

The Euro-Zone’s Consumer Price Index (CPI) may dampen the bearish sentiment surrounding the Euro and spur a short-term rebound in EUR/USD should the report highlight sticky price growth across the monetary union.

What’s Expected:

View gallery

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EUR/USD CPI

Click Here for the DailyFX Calendar

Why Is This Event Important:

Indeed, signs of stabilizing price pressures may encourage the European Central Bank (ECB) to soften its dovish outlook for monetary policy, and President Mario Draghi may talk down expectations for a further expansion in the easing cycle as the region gets on a more sustainable path.

Expectations: Bullish Argument/Scenario

The pickup in business sentiment along with the expansion in private-sector consumption may generate sticky price growth in the euro-area, and a positive development may heighten the appeal of the single currency as market participants scale back bets for additional monetary support.

Risk: Bearish Argument/Scenario

However, falling input prices paired with the ongoing contraction in private-sector lending may encourage European firms to further discount consumer prices, and a dismal inflation print may trigger a short-term decline in the exchange rate as the ECB keeps the door open to implement more non-standard measures.

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How To Trade This Event Risk(Video)

Bullish EUR Trade: Headline & Core Inflation Exceed Market Expectations

  • Need green, five-minute candle following the release to consider a long EUR/USD trade
  • If market reaction favors a bullish Euro trade, buy EUR/USD with two separate position
  • Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish EUR Trade: Euro-Zone CPI Highlights Greater Threat for Deflation

  • Need red, five-minute candle to favor a short EUR/USD trade
  • Implement same setup as the bullish Euro trade, just in opposite direction

Read More:

Scalp Webinar: USD Defends Support Slope- Bulls at Risk Ahead of NFP

AUD/USD Retail FX Flips Net-Long; March Low (0.7559) on Radar

Potential Price Targets For The Release

EUR/USD Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • String of failed attempts to close above the 1.1000 region may highlight a near-term topping process in EUR/USD especially as the RSI struggles to retain the bullish momentum from earlier this month.
  • Interim Resistance: 1.0970 (38.2% expansion) to 1.0990 (50% retracement)
  • Interim Support: 1.0620 (61.8% expansion) to 1.0640 (38.2% expansion)

Impact that the Euro-Zone CPI report has had on EUR during the last release

January 2015 Euro-Zone Consumer Price Index (CPI)

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EUR/USD Chart

The Euro-Zone’s Consumer Price Index (CPI) slipped at an annual pace of 0.3% in February after contracting 0.6% the month prior, while the core rate of inflation held steady at an annualized 0.6% for the second consecutive month. Despite the ongoing slack in the euro-area, the European Central Bank’s (ECB) quantitative easing (QE) program may continue to shore up the ailing economy as the President Mario Draghi adopts an improved outlook for the monetary union. The initial reaction in the Euro was short-lived as EUR/USD struggled to hold above the 1.1225 region, and the single currency struggled to hold its ground throughout the North American trade as the pair ended the day at 1.1181.

— Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail [email protected] Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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Sterling weaker on subdued inflation outlook, looming election

By Ahmed Aboulenein

LONDON, March 25 (Reuters) – Sterling fell against the euro on Wednesday, hitting a one-month low as investors pushed back expectations of interest rate hikes amid growing talk that inflation in Britain will stay low for sometime to come.

Annual inflation in Britain dropped to zero in February and investors are factoring in the chance of a first rate hike in mid-2016, having pushed it back from early 2016 last week.

BoE policymaker Kristin Forbes said on Wednesday that the low rate of inflation was unlikely to persist, so interest rates would need to rise as the economy recovers, but her comments appeared to have little impact on the pound.

Bank of England Chief Economist Andy Haldane said last week the bank should be ready to cut rates further if inflation looked likely to stay below its 2 percent target. The next policy move was as likely to be a cut in rates as a hike, he said.

Those comments echoed a cautious tone from the BoE’s monetary policy committee in minutes from its latest meeting released last Wednesday, where members flagged the impact of a strengthening pound on inflation.

The pound was down 0.1 percent to 73.66 pence per euro and against the dollar it was up 0.4 percent at $ 1.4900. The euro was also helped by a robust survey of German business morale.

“Our view is that the BoE won’t be hiking interest rates until February 2016 at the earliest and the current inflation outlook suggests the hike can come later rather than earlier. Consequently you have a movement higher in euro/sterling,” said Jane Foley, senior currency strategist at Rabobank in London.

“There is another factor: the approach of the British general election. The market is becoming more aware as we get closer that there could be, potentially, a significant period of time before a coalition is in place.”

Britain holds a parliamentary election on May 7 and the latest opinion polls point to a ‘hung parliament’, in which no single party can form a government on its own.

“Sterling is going to weaken in the next month because of election risk. Our forecast for cable (dollar/sterling) is $ 1.42 and for euro/sterling to trade higher in the short term. It will recover after the election,” said Phyllis Papadavid, senior global FX strategist at BNP Paribas in London.

“There is a lot of political news coming out of the UK, there is some economic news. The BoE Monetary Policy Committee members have sounded more dovish as well.” (Editing by Crispian Balmer)

EUR/USD Risks Fresh Monthly Lows on Dismal Euro-Zone CPI

DailyFX.com –

Euro-Zone Consumer Price Index (CPI) to Slip Back to 0.3%- Lowest Since October 2009

Core Rate of Inflation to Grow Annualized 0.7% for Second Consecutive Month

For more updates, sign up for David’s e-mail distribution list.

Trading the News: Euro-Zone Consumer Price Index (CPI)

A further slowdown in the Euro-Zone’s Consumer Price Index (CPI) may heighten the bearish sentiment surrounding the EUR/USD as it puts increased pressure on the European Central Bank (ECB) to implement more non-standard measures.

What’s Expected:

View gallery

.

EUR/USD CPI

Click Here for the DailyFX Calendar

Why Is This Event Important:

There’s growing bets that the Governing Council may have little choice but to implement quantitative easing across the monetary union amid the growing threat for deflation, and the single currency remains at risk of facing additional headwinds in 2015 as the economic recovery remains subdued.

Expectations: Bearish Argument/Scenario

Waning confidence paired with the renewed weakness in private sector consumption may drag on price growth, and the growing risk for deflation may push the ECB to adopt more emergency measures in an effort to achieve its one and only mandate to deliver price stability.

Risk: Bullish Argument/Scenario

However, the CPI report may show sticky price growth in Europe as the region returns the growth, and a stronger-than-expected inflation print may trigger a more meaningful correction in EUR/USD as it mitigates the risk for deflation.

Join DailyFX on Demand for Real-Time SSI Updates!

How To Trade This Event Risk(Video)

Bearish EUR Trade: Euro-Zone CPI Slips to 0.3% or Lower

  • Need red, five-minute candle following the release to consider a short EUR/USD trade
  • If market reaction favors selling Euro, short EUR/USD with two separate position
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bullish EUR Trade: Headline Reading for Inflation Tops Market Forecast

  • Need green, five-minute candle to favor a long EUR/USD trade
  • Implement same setup as the bearish Euro trade, just in opposite direction

Read More:

Price & Time: December Dollar Surprise?

Gold Rebound Vulnerable Sub $ 1207- Weekly Opening Range in Focus

Potential Price Targets For The Release

EUR/USD Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • Will continue to look for lower highs & lows as the downward trending channel remains in play.
  • Interim Resistance: 1.2610 (61.8% expansion) to 1.2620 (50% retracement)
  • Interim Support: 1.2280 (100% expansion) to 1.2290 (38.2% expansion)

Impact that the Euro-Zone CPI report has had on EUR during the last release

October 2014 Euro-Zone Consumer Price Index

View gallery

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EUR/USD Chart

The Euro-Zone Consumer Price Index (CPI) rose an annualized 0.4% after expanding 0.3% in September, while the core rate of inflation unexpectedly slipped to 0.7% from 0.8% during the same period. Despite the rebound from a 5-year low, the weakening outlook for inflation may force the European Central Bank (ECB) to implement additional monetary support as the Governing Council struggles to achieve its one and only mandate for price stability. Despite the initial tick higher in EUR/USD, the single currency struggled to hold its ground during the North America trade as the pair ended the day at 1.2521.

— Written by David Song, Currency Analyst and Shuyang Ren

To contact David, e-mail [email protected] Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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EUROPE ECONOMY-Faltering demand weighs on euro zone business growth in September

By Sumanta Dey

Oct 3 (Reuters) – Euro zone business grew at its slowest rate this year in September on tumbling demand, surveys showed on Friday, as the bloc struggles to add momentum to its fragile economic recovery.

Germany’s private sector expanded at a robust pace last month, pointing to an economic rebound between July-September after Europe’s biggest economy unexpectedly shrank the quarter before.

However, business growth in the euro zone’s number two and three economies – France and Italy – contracted, suggesting stagnation or worse there could continue.

Despite firms cutting prices more deeply, the common thread across most of the surveys in the euro zone was that of weak demand, with businesses and consumers lacking the confidence to spend in economies plagued by high unemployment and years of austerity.

This mirrors order book conditions for factories in much of Asia as well.

The data are likely to disappoint policymakers yet again, a day after the European Central Bank outlined its plans to buy securitised debt in a bid to revive lending and boost demand.

“The PMIs reflect a familiar dangerous trend of low demand and weak producer pricing power which reinforces concerns on the effectiveness of the ECB’s stimulus,” said Lena Komileva, chief economist at G+ Economics in London.

“The ECB does not have much room for error with the starting point of close to zero rate of inflation and growth.”

President Mario Draghi said on Thursday the ECB would start buying covered bonds this month and other bundles of securitised debt by year-end, but did not provide any estimate of the target size of the programme which is planned to run for two years.

He also offered no hints of a quantitative easing programme involving the purchase of sovereign debt, disappointing markets that were hoping the ECB would do more.

A Reuters poll last week predicted the ECB would spend 300 billion euros in the ABS programme, while banks will likely bid for 175 billion euros at December’s targeted loan tender.

In the first tranche, a meagre 82.6 billion euros was taken up by banks.

Together, it means the ECB will eventually expand its balance sheet by only about half of the just over one trillion euros it lent out under the long-term refinancing operations in late 2011 and early 2012.

In Britain, growth in the services industry eased slightly and a composite measure for the whole of the private sector dropped to its lowest in six months.

Although still comfortably in growth territory, that raises risks of an end-of-year slowdown for the UK economy after it enjoyed a stellar few quarters of growth. This could hurt expectations of a rate hike from the Bank of England in the first quarter of next year.

WEAK DEMAND

Markit’s Composite Purchasing Managers’ Index (PMI), based on surveys of thousands of companies across the euro zone and seen as a good gauge of growth, fell to a ten-month low of 52.0, below August’s 52.5 and weaker than the flash estimate of 52.3.

It was, however, the 15th month that the index has remained above the 50 line that denotes growth.

Worryingly though, the new orders sub-index, which measures demand, eased last month to the lowest in almost a year while firms cut prices by the most in 14 months.

Euro zone inflation is at a five-year low of just 0.3 percent and the economy stagnated in the second quarter.

Low inflation could provide some impetus to the economy, shoring up consumers’ purchasing power. Indeed, official euro zone data also released Friday showed retail sales increased much more than expected in August, pointing to stronger demand from households.

However, anaemic consumer price growth is more widely seen as a signifier of the euro zone’s economic weakness and, if it continues, could prompt policymakers to look at other levers to jump-start activity.

“The waning of growth signaled by the PMI will apply further pressure on the ECB to broaden the scope of its purchases, to not only buy riskier asset-backed securities but to also start purchasing government debt,” said Chris Williamson, chief economist at Markit.

Economists in a Reuters poll last week gave a 40 percent chance of such a move by the ECB.

(Editing by Toby Chopra)

Euro zone inflation falls again amid deflation fears

The euro zone data follow some disappointing figures on Wednesday, which saw Spain slide into deflation – where the growth in consumer prices turns negative and begins to fall. Germany – considered to be the powerhouse of the region – saw its rate of inflation slow to 0.8 percent, following on from last month’s reading of 1.0 percent.

Analysts at BNP Paribas called the flash reading a “new cyclical low” and said they expected it to remain around current levels over the next couple of months, with risks tilted to the downside.

Read MoreNew hope for euro zone as yields hit record lows

The European Central Bank (ECB) sees inflation as a key metric in gauging the state of the euro zone, and announced a slew of measures back in June to try to spur on the region’s flagging economy. Many analysts fear deflation could lead to a downward spiral, with consumers holding off on purchases in the expectation that prices could fall further. Others see deflation as a natural rebalancing within the region, believing that consumer prices need to slide to counterbalance an overly-strong euro.

Mario Greco, CEO of Italian insurance company Generali, told CNBC on Thursday that the euro zone is “probably” already in state of deflation.

“The European situation is quite concerning,” he said. “I mean the labor situation in all of Europe, you know, is not moving. It’s not moving good at all.”

Read MoreEuro zone business activity rebounds, France lags

Some have accused the ECB of acting too late to tackle the risk of deflation, with most of its stimulus measures not expected to kick in until later this year and little chance of the central bank announcing new measures in the meantime.

Euro-Zone Construction Declined in May


Construction across the 18 countries that share the euro fell in May, another sign that the currency area’s economic recovery remains weak.

The European Union’s statistics agency also confirmed Thursday that the annual rate of inflation remained at 0.5% in June.

The figures suggest that the euro zone is mired in a period of very low growth and inflation, increasing the risk that it could be pushed into a period of falling prices by some unexpected setback. Consumer prices fell on the year in Greece, Portugal and Slovakia, and were unchanged in Spain and Cyprus.

“There is obviously the risk that persistently very low inflation could morph into something worse,” said Howard Archer, an economist at IHS Global Insight.

June marked the ninth straight month in which the inflation rate was below 1%. The ECB targets an inflation rate of just below 2%. Only Austria had an inflation rate close to the ECB’s target, with prices rising 1.7% from June 2013.

Very low inflation makes it more difficult for governments, households and businesses to reduce their debts, a particular problem in highly indebted southern Europe, but not limited to that part of the euro zone. It also makes it more difficult for southern Europe to regain lost competitiveness relative to Germany.

Very low inflation increasingly appears to be a problem confined to Europe. In May, consumer prices rose at a more rapid pace across most of the world’s other large economies for the third straight month. The annual rate of inflation remained above 1% in Japan, which is attempting to escape from a long period of deflation, or a self-reinforcing period of falling prices.

The European Central Bank responded to weakening growth prospects and too low inflation by announcing a package of measures on June 5 that included interest-rate cuts and cheap, medium-term funding for banks that is intended to be passed on to businesses.

It will take many months for those measures to have an impact on economic activity and prices. However, some European politicians have already concluded that they won’t prove sufficient. Speaking last week, French Economy Minister Arnaud Montebourg demanded the central bank stem European disinflation that effectively is leaving French firms with pricing constraints that erode their profit margins.

“In a context where inflation is historically weak it is inevitable and unavoidable that the ECB asks itself questions and goes even further in nonconventional monetary policy by at last buying public assets if the euro still doesn’t fall and growth doesn’t pick up in the euro zone,” Mr. Montebourg said.

Eurostat said consumer prices rose by just 0.1% from May. Excluding volatile items such as food and energy, the core rate of inflation rose to 0.8% from 0.7%.

The statistics agency said construction in May was down 1.5% from April, but up 3.5% from the same month last year. Previously released figures showed that industrial output also fell sharply in May.

Economists said the scale of those declines was likely exaggerated by the fact that the May 1 public holiday was on a Thursday, with many workers also taking the following day off to create a longer, four-day break including the weekend.

But those declines come as business surveys show little indication of a hoped for pickup in the economy during 2014.

The euro zone’s economy has struggled to grow in the years since the 2008 financial crisis, and in particular has lagged behind other parts of the world economy since its interlinked government debt and banking crises erupted in late 2009.

But with the worst of those crises appearing to have passed last year, policy makers had hoped for a gradual acceleration in the rate of growth as 2014 advanced. Instead, the first quarter marked a slowdown from the final three months of 2013, and hopes for a significant rebound in gross domestic product during the second quarter are fading with every data release.

Write to Paul Hannon at [email protected]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

    (END) Dow Jones Newswires   07-17-140555ET   Copyright (c) 2014 Dow Jones & Company, Inc. 




Euro-zone Inflation Slows, Jobless Rate Falls


The annual rate of inflation in the 18 countries that share the euro fell back to its lowest level in more than four years during May, a development that could retard or derail the currency area’s weak economic recovery.

Very low inflation makes it more difficult for governments, households and businesses to reduce their debts, a particular problem in southern Europe, but not limited to that part of the euro zone. It also makes it more difficult for southern Europe to regain lost competitiveness relative to Germany. Where consumers and businesses start to expect that prices will decline, they could postpone purchases and weaken growth.

The European Union’s statistics agency said consumer prices rose by just 0.5% in the 12 months to May, down from 0.7% in the 12 months to April. The rate of inflation was 0.5% in March, but before that month was last as low in November 2009.

The slowdown in inflation was largely due to prices for services, which rose 1.1% in the 12 months to May, compared with 1.6% in the 12 months to April. The core rate of inflation–excluding volatile items such as food and energy–fell to 0.7% from 1.0%.

James Ashley, an economist at RBC Capital Markets, said in contrast to readings for March and April that were distorted by differences in the timing of the Easter vacation between this year and last, the May figure is a true reflection of inflation dynamics in the currency area.

“This latest easing in inflation is of genuine significance,” he said. “in our view, the 0.5% reading is a “clean” reflection of the dearth of inflationary pressures.”

The renewed decline in the inflation rate has cemented widespread expectations in financial markets that the European Central Bank will reduce interest rates and announce other measures to stimulate bank lending when it meets on Thursday. The ECB targets an inflation rate of just under 2.0%. But the euro zone’s inflation rate has been below 1.0% since October 2013.

The package of steps is expected to include a negative rate on bank deposits parked overnight at the ECB, which would make it the largest central bank to experiment with such a policy. The rate is currently zero, and charging banks to deposit excess funds with the central bank could weaken the euro and add to inflation through higher prices for imported goods and services.

The central bank’s governing council isn’t expected to embark on a program of asset purchases using freshly created money, as employed by the U.S. Federal Reserve and the Bank of England.

“The latest figures are unlikely to alter the governing council’s view that the threat of deflation isn’t currently large enough to justify the implementation of a quantitative easing program,” said Ben May, an economist at Oxford Economics.

However, there are some signs the euro zone’s economy is on the mend, with the unemployment rate falling in April to its lowest level since October 2012. Eurostat said the number of people without jobs fell by 76,000 during April, and was down 487,000 from April 2013.

The problems of high unemployment and low inflation may be interlinked. High levels of joblessness have meant that consumer spending has been very weak for a prolonged period, making it difficult for businesses to raise prices even when their costs increase.

At 18.75 million, the number of people without work is still well above the 11.5 million recorded before the onset of the 2008 financial crisis, and economists say it take some time to get back to those earlier levels.

“Labor market normalization will continue, but the unemployment rate should inch down only gradually,” said Apolline Menut, an economist at Barclays. “We expect the economic recovery to be too moderate to spur significant job creation in the short term. We think firms are likely to restore profit margins and seek productivity gains, before increasing their staff levels.”

Write to Paul Hannon at [email protected]

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    (END) Dow Jones Newswires   06-03-140535ET   Copyright (c) 2014 Dow Jones & Company, Inc. 




Euro-zone Inflation Rate Falls


The annual rate of inflation in the 18 countries that share the euro fell back to its lowest level in more than four years during May, a development that could retard or derail the currency area’s weak economic recovery.

Very low inflation makes it more difficult for governments, households and businesses to reduce their debts, a particular problem in southern Europe, but not limited to that part of the euro zone. It also makes it more difficult for southern Europe to regain lost competitiveness relative to Germany. Where consumers and businesses start to expect that prices will decline, they could postpone purchases and weaken growth.

The European Union’s statistics agency said consumer prices rose by just 0.5% in the 12 months to May, down from 0.7% in the 12 months to April. The rate of inflation was 0.5% in March, but before that month was last as low in November 2009.

The slowdown in inflation was largely due to prices for services, which rose 1.1% in the 12 months to May, compared with 1.6% in the 12 months to April. The core rate of inflation–excluding volatile items such as food and energy–fell to 0.7% from 1.0%.

The renewed decline in the inflation rate has cemented widespread expectations in financial markets that the European Central Bank will reduce interest rates and announce other measures to stimulate bank lending when it meets on Thursday. The ECB targets an inflation rate of just under 2.0%. But the euro zone’s inflation rate has been below 1.0% since October 2013.

Write to Paul Hannon at [email protected]

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    (END) Dow Jones Newswires   06-03-140535ET   Copyright (c) 2014 Dow Jones & Company, Inc. 




Factbox: ECB policymakers' recent comments

FRANKFURT (Reuters) – The European Central Bank is not expected to announce any new measures on Thursday to boost the euro zone economy, although inflation dropping almost to zero could well prompt active discussion about stimulus.

Following are highlights of ECB policymakers’ comments since the March 6 meeting.

To read full stories, double click on the links in brackets.

JENS WEIDMANN (GERMANY), MARCH 29

“With regard to the rate of inflation at the moment, the euro area is not in a self-enforcing downward spiral of price decreases, which is nominally the definition of deflation.

MARIO DRAGHI (PRESIDENT), MARCH 25

“Do we have any evidence that people are actually postponing their spending plans? We don’t see any evidence of that.

ERKKI LIIKANEN (FINLAND), MARCH 25

“If you want to tackle the issues with traditional monetary policy, then you should be able to cut rates further. We are at low levels but we have not exhausted our maneuvering room. It’s not huge, but it’s not exhausted. The question of negative deposit rates, in my mind, isn’t any longer a controversial issue.”

“As for assets purchases, we must do what our legal framework allows and we must assess the size of our balance sheet and risks. The central bank is always able to buy from the secondary markets.

IGNAZIO VISCO (ITALY), MARCH 25

“The risk that long-term inflation expectations become detached from price stability must be countered with determination.

JOZEF MAKUCH (SLOVAKIA), MARCH 25

“Regarding deflation in the euro zone, of course there are higher deflationary risks which we perceive in the ECB. That is the reason why we are preparing additional non-standard measures … to avoid getting into a deflationary environment. There are a number of members of the ECB Council who are ready to take bold steps, of course, if needed.

JENS WEIDMANN (GERMANY), MARCH 25

On quantitative easing: “This does not mean that a QE program is generally out of the question. But we have to ensure that the prohibition of monetary financing is respected. … We need to discuss this and ideally achieve a common view.

“Of course any private or public assets that we might buy would have to meet certain quality standards.”

On a negative deposit rate: “If you wanted to counter the consequences of a strong appreciation of the euro for the inflation outlook, negative rates would, however, appear to be a more appropriate measure than others. But we are talking about hypothetical scenarios here and not about imminent decisions.”

VITOR CONSTANCIO (VICE PRESIDENT), MARCH 22

On tying interest-rate policy to specific economic thresholds as part of the ECB’s forward guidance: “We think it would not be useful.

KLAAS KNOT (NETHERLANDS), MARCH 21

On QE: “I would only not rule it out categorically in case of a large negative shock, like a deflationary downward spiral. But even in that situation, we would have a nicely filled tool box to deploy other measures first.

SABINE LAUTENSCHLAEGER (EXECUTIVE BOARD), MARCH 20

“We will start to change our interest rate policy when the necessary conditions exist.

MARIO DRAGHI (PRESIDENT), MARCH 13

On deflation: “At present, risks of deflation … are quite limited. … But the longer inflation remains low, the higher the probability of such risks emerging. That is why the ECB has been preparing additional non-standard monetary policy measures to guard against such a contingency and why it stands ready to take further decisive action if needed.

“Our forward guidance therefore creates a de facto loosening of policy stance, as real interest rates are set to fall over the projection horizon.

KLAAS KNOT (NETHERLANDS), MARCH 13

“At this moment there is no reason for further unconventional measures because we see the deflation risk as very limited. … I don’t think it (deflation) will get out of hand.

JENS WEIDMANN (GERMANY), MARCH 13

“Unconventional measures, some of which would take us into new territory, would have to be discussed, and in my view there are some very important legal issues there.

“An appreciation of the euro can lead to a change in inflation outlook, which will then have to be taken into account in our forecasts and monetary policy reaction.

BENOIT COEURE (EXECUTIVE BOARD), MARCH 13

“The Governing Council of the ECB expects interest rates to stay at present or lower levels for an extended period of time, while inflation should rise towards 2 percent over our projection horizon. This implies that real interest rates for borrowers will progressively fall as inflation rises. And we stand ready to act if this scenario does not materialize.

PETER PRAET (EXECUTIVE BOARD), MARCH 12

“We will act if we think it is necessary to act. We are not there yet.

“Economic uncertainty has increased. So, too, has our toolbox, which now also includes various non-standard measures – which we are ready to use to achieve our price stability mandate.

LUIS MARIA LINDE (SPAIN), MARCH 12

“In its announcements, the ECB has said that it will maintain its accommodative monetary policy. … Depending on events, there may be new measures. If the euro keeps appreciating against the dollar, that could lead to additional measures.

BENOIT COEURE (EXECUTIVE BOARD), MARCH 12

On reviving the euro zone market for securitized loans, especially for small- and medium-sized companies: “It is probably outside of monetary policy. It is a far-reaching project. It is not for the ECB to lead it, we can support it. It is for the EU Commission to lead it.

“We don’t see deflation in the euro zone. We see it as a risk.

SABINE LAUTENSCHLAEGER (EXECUTIVE BOARD), MARCH 10

“We have room left to act. The deposit rate could be negative, for example. That’s at least a possibility depending on whether the underlying factors we observe would call for this sort of measure.”

On the ECB’s yet-to-be-used government bond purchase program, dubbed OMT: “Overall, I am a little bit critical about the incentives structure offered by the OMT. I do see some legal questions coming up.

CHRISTIAN NOYER (FRANCE), MARCH 10

“Monetary policy should remain active because persistently low inflation threatens the achievement of price stability as commonly defined by all major central banks today.”

“The recent appreciation of the euro has had indeed a strong disinflationary impact.

(Compiled by Frankfurt Newsroom; Editing by Gareth Jones)

Euro-Zone Inflation Rate Lowest Since Late 2009


The annual rate of inflation across the 18 countries that share the euro fell again in March to its lowest level since late 2009, bringing the currency area closer to a paralyzing bout of extremely low inflation, or even broad-based price declines known as deflation.

The European Union’s statistics agency Monday said consumer prices rose by 0.5% from March 2013, the lowest annual rate of inflation since November 2009 and well below the European Central Bank’s target of just under 2%.

The inflation figure puts further pressure on ECB officials to consider fresh stimulus measures when they meet Thursday, including negative rates on bank deposits.

When prices grow too slowly, households, businesses and governments have a harder time servicing their debts, while consumers may put off spending. These pressures intensify when prices fall outright, as has been the case in Japan for the past two decades.

ECB officials have dismissed deflation fears, noting that the euro zone’s economic recovery is proceeding largely as expected. But they have signaled a heightened sensitivity to too-low inflation.

“We will do what is needed to maintain price stability,” ECB President Mario Draghi said.

The case for action isn’t clear-cut. Some of the weakness in consumer prices this month may be due to the late timing of Easter this year, analysts said, which means higher travel prices may occur in April instead of March.

Mr. Draghi and his colleagues on the ECB’s governing council have noted that some of the slowdown in the inflation rate is down to weaker global prices for energy, something over which they have little control.

Some of the weakness in the inflation measure during March was down to falling energy prices, which dropped 2.1% from March 2013. But prices for other goods and services that are driven by purely domestic demand rose at a slower pace, and the core measure of inflation–which excludes volatile items such as energy and food–slowed to 0.8% from 1.0% in February.

Write to Paul Hannon at [email protected]

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    (END) Dow Jones Newswires   03-31-140525ET   Copyright (c) 2014 Dow Jones & Company, Inc.