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Nowotny: Eurozone risks negative inflation

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OeNB President Ewald Nowotny. Photo: OeNB/Clemens Fabry
08:25 CET+01:00
Plunging oil prices could push eurozone inflation into negative territory during "some months" in the first half of 2016, European Central Bank (ECB) board member Ewald Nowotny said on Friday.

Eurozone inflation remained stuck at 0.2 percent in December, a long way below the ECB's stated target of just below 2 percent, despite ongoing efforts by the bank to kickstart consumer prices.

Nowotny told reporters oil prices were weighing not just on overall prices, but also on underlying, or core, inflation, a measure which strips out food and energy prices.

"There is the risk that the decline of the oil price also has an impact on core inflation via second-round effects, for instance due to lower transport costs," Nowotny, who also heads up Austria's central bank, was quoted as saying by Bloomberg News.

Nowotny warned that the onset of deflation "would place us in very dangerous territory."

Oil prices this week hit a 12-year low owing to a supply glut and weak demand.

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His remarks came a day after ECB chief Mario Draghi hinted at possible additional monetary stimulus as early as March to kick-start inflation in the euro area.

"There are no limits how far we are willing to deploy our policy instruments within our mandate," Draghi said.

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