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Thu, 12 Jun, 2014 09:06:26 PM
FTimes- Xinhua Report, June 12


Photo AFP-Lehtikuva
Although price pressures will remain subdued for a longer period in the euro area, inflation rates will gradually increase and there is no risk of deflation, the European Central Bank (ECB) said in its monthly bulletin released on Thursday.
The exceptionally low inflation is mainly due to the global decline in energy and food prices, and the rise of the euro exchange rate in recent months has also helped to mitigate the price pressure, the monthly report said.
According to Eurostat's flash estimates, euro area annual HICP inflation was 0.5 percent in May 2014, after being 0.7 percent in April.
The recent very low inflation of 0.5 percent could be relativized by the fact that it is also triggered by price declines in individual countries, which need to improve their competitiveness, the report said.
On June 5, the ECB decided to cut the interest rates of the main refinancing operation, marginal lending facility and deposit facility to 0.15 percent, 0.4 percent and minus 0.1 percent respectively. It is the first time that the ECB has decided to cut the deposit rate to negative.
ECB president Mario Draghi said that these measures "will contribute to a return of inflation rates to levels closer to 2 percent."
In its monthly bulletin, the ECB also revised its economic projections for inflation in euro area for 2014, 2015 and 2016 downwards to 0.7 percent, 1.1 percent and 1.4 percent respectively.
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