The European Central Bank is committed to using additional unconventional instruments if necessary to fend off deflation in the euro zone, governing council member Erkki Liikanen said on Tuesday.
Earlier this month the ECB cut interest rates to near zero and launched a program to buy asset-backed securities (ABS) on top of the four-year loans it will offer banks in September to fuel lending to firms and households to try to revive growth.
“Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council has underlined that it is unanimous in its commitment to using additional unconventional instruments,” Liikanen, who is also governor of the Bank of Finland, said in a statement.
The Bank of Finland trimmed its 2015 growth forecast for the EU21, which includes the countries that use the euro and Sweden, Denmark and Britain, to 1.1 percent from a previous 1.4 percent.
It said it sees GDP in Russia, one of Finland’s biggest trade partners, flatlining this year and growing only 0.5 percent in 2015, weighed down by the Ukraine crisis.
It also said inflation in the EU21 bloc would gather pace during 2015 to above 1 percent and end at about 1.5 percent in 2016.
“The forecast is based on inflation expectations remaining anchored plus a gradual recovery in domestic demand and the ending of the counterinflationary effect of euro appreciation in 2012-2014,” the banks said in a report. [Reuters]