Central Banks

ECB's Draghi says failing to act early on inflation is risky


The risk of acting too late on ultra low inflation is greater than that of acting too early as a wait-and-see stance could lead to a lasting loss of confidence, European Central Bank president Mario Draghi said on Thursday.

"Adopting a wait-and-see attitude and extending the policy horizon brings with it risks: namely a lasting de-anchoring of expectations leading to persistently weaker inflation," Draghi told a conference at the Bundesbank, Germany's central bank.

"And if that were to happen, we would need a much more accommodative monetary policy to reverse it," Draghi said. "Seen from that perspective, the risks of acting too late outweigh the risks of acting too early."

Draghi added that if the ECB were to capitulate and agreed to long periods for inflation to return to target, the bank would only perpetuate disinflation.

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