ECB VP warns eurozone prices could briefly turn negative
Photo Lucas Papademos
(BRUSSELS) - Consumer price inflation in the 16 countries using the euro could briefly dip into "negative territory" this year, European Central Bank vice president Lucas Papademos said Thursday.
"In the course of this year, actual inflation may fall into negative territory for a short period of time," he told a conference in Brussels, stressing that the risk of deflation was "highly unlikely."
Deflation is generally defined as fall in consumer prices over a protracted period of time.
While the prospect of falling prices may delight consumers, deflation can wreak havoc on the broader economy as consumers put off purchases in hope of getting a better bargain in the future, cutting into company's profits.
The ECB strives to keep inflation within a comfort zone that it considers as an annual rate of close to but less than 2.0 percent.
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