ECB will take action: Portugal finance minister

Published Tue, Apr 15 2014 5:36 AM EDTUpdated Tue, Apr 15 2014 5:38 AM EDT

Katy Barnato

The European Central Bank (ECB) still plans to take action to combat the problem of low and falling inflation despite holding off and disappointing markets over the past few months, Portugal's finance minister told CNBC.

Maria Luís Albuquerque forecast the central bank would soon instigate monetary easing to boost inflation, highlighting ECB President Mario Draghi's insistence at his last news conference that the use of "unconventional" policies was still under consideration.

"One would expect in the near-future we would know more details about it," Luís Albuquerque told CNBC, speaking from the spring meeting of the International Monetary Fund (IMF) in Washington DC.

"They (the ECB) just said at the last Board of Governor's meeting that they discussed it and were considering it."

Unlike central banks in the U.K., U.S. and elsewhere, the ECB has not launched a bond-buying program to either stimulate the economy or boost inflation, which slipped to a 52-month low of 0.5 percent in the euro zone last month.

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However, Draghi has stoked speculation that a program might be forthcoming, with his regular mentions of the "unconventional" tools at his disposal.

Economists had raised concern about disinflation—where the increase in prices slows—in the euro zone, and whether this could lead to deflation, where prices actually fall.

One fear with deflation is that it can push down demand, as people hold off on purchases in the hope of further price declines. This can lead to lower production and an economic slump.

Nonetheless, the ECB once again took no new action after its monthly meeting in April, despite calls from the likes of the IMF to do so. Instead, the central bank held its key interest rate at 0.25 percent and kept the rate on its deposit facility at zero.

Luís Albuquerque is not alone though in forecasting the ECB will soon act. Lorenzo Bini Smaghi, an ex-member of the central bank's executive board, told CNBC earlier this month that action would materialize within a "couple of months".

Like Bini Smaghi, Luís Albuquerque attributed the central bank's delay to the need to form consensus among its 24-member governing council, which includes the central bank governors of the 18 euro zone countries.

"We need of course to reach agreement across all the countries that are part of the single currency," Luís Albuquerque said.

"We do not necessarily have the same problems or face the same challenges, so finding this balance is always something which is difficult in Europe… That will take a little time, but I think the ECB is really determined to do whatever it takes."

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