Lower oil prices could depress inflation and raise scope for additional quantitative easing, the European Central Bank's chief economist Peter Praet said in an interview with a Germany daily.
With lower oil prices, inflation is likely to remain negative during a substantial part of 2015, he told Boersen-Zeitung. «Inflation expectations are extremely fragile,» and «we cannot simply «look through,» Praet said.
The price competition could also depress core inflation and contribute to the de-anchoring of inflation expectations, he observed.
The economist said sovereign bonds are the only sort of security that has a significant market volume. «There is not too much to buy on the corporate bond market and it is concentrated in a small number of countries,» Praet said.
«Buying bank bonds could raise concerns, because we are also supervisors,» the economist said. «Theoretically, we could also always buy indices where you have no control of the composition.»
There is a risk of real economic vicious cycle. «This is why we are underlying the urgent action is necessary,» Praet said.
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