LONDON: Britain urged the European Central Bank to take all necessary steps to fight off the risk of deflation, a week before ECB policymakers meet to discuss whether to embark on an unprecedented government bond buying program.
George Osborne, Chancellor said that distinguished between Britain where inflation has just hit a 14 year low of 0.5 per cent and the euro zone where inflation has been lower for months.
Osborne has urged the ECB previously to take action to revive the economy of Britain’s biggest trading partner. But his latest intervention appears more forceful than before as the euro zone’s weakness risks weighing on Britain’s own prospects in the run up to a finely balanced national election on May 7.
Osborne said the low inflation we see here in the UK driven as it is almost entirely by external factors such as the oil price is much more welcome than in the euro zone.
He added there the debate has understandably turned to the dangers of deflation the risk of a self reinforcing spiral where economic activity falters, consumers defer purchases and nominal debt burdens become ever harder to manage.
ECB President Mario Draghi and his colleagues prepare to decide on Jan. 22 whether to buy hundreds of billions of euros of government bonds to lift euro zone inflation towards its target of just below 2 per cent.
