Deflation in Europe is no longer a blip in the system

Weakness in euro zone price pressures has extended to the medium-term, the time horizon the European Central Bank looks at when deciding on policy, ECB policymaker

Peter Praet

Peter Praet said.

Praet, who holds the powerful economics portfolio on the ECB's Executive Board, told Portuguese newspaper Expresso: "If our mandate is at risk, we will act without hesitation".

The ECB's mandate is to deliver price stability, which it defines as inflation of close to but below 2 percent over the medium-term. Euro zone inflation is running at just 0.7 percent - well below the target.

"We do not see a risk of deflation, but we admit that the pressures on prices are weak, and that this weakness in price development is extending to the medium-term," Praet said in the newspaper interview, conducted on Feb. 18.

The ECB holds its next policy meeting on March 6.

"When we issued our forward guidance last November, we communicated that we will continue to have a very loose monetary policy and we will do whatever is necessary to fulfill our mandate," Praet added.

"We are therefore very aware of what you are referring to, i.e. that low price pressures have extended to the medium term. Let's make this assessment in March."