Nowotny Says ECB Has Multiple Tools to Fight Inflation Slowdown

European Central Bank Governing Council member Ewald Nowotny said policy makers have several tools at their disposal to prevent deflation in the euro area.

“If there should be a need for further measures, yes, we do have number of measures in the arsenal,” Nowotny told reporters in Vienna today.

The Frankfurt-based ECB unexpectedly cut its benchmark interest rate to a record low of 0.25 percent this month after inflation in the 17-nation currency bloc slowed to a four-year low of 0.7 percent. One quarter of the Governing Council, including Germany’s Jens Weidmann and members from countries traditionally aligned with the Bundesbank, opposed the move, according to two people familiar with the talks.

“It’s no secret, there was a discussion whether it was the right time for this action or not,” Nowotny said. The ECB’s decision to act was “in some way reflecting this perspective of a low rate of inflation for a longer term,” he said.

The ECB’s next move will probably be to inject liquidity into the financial system, according to a Bloomberg News survey of economists. More than three-quarters of the participants said the central bank would take such an action in the first half of 2014.

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