(Reuters) - Low euro zone inflation and the strong euro could both start to self-correct this year without necessarily requiring any action from the European Central Bank, one its policymakers Ewald Nowotny said on Tuesday.
The ECB meets next month armed with new staff forecasts that for the first time will stretch out as far as 2016. Economists expect them to show inflation, currently running at just 0.7 percent, staying well below the bank's preferred level of just under 2 percent all the way out.
"One could expect that if the real economy is getting up and if we see that in Germany wage increases are quite substantial, there might be a certain self-correcting trend (in inflation)," Nowotny said, adding that it was too early to say for certain.
"So we will see whether this needs some specific action or whether ... there would be a merit for waiting."
Some German workers, backed by powerful unions, are calling for wage increases of more than 5 percent this year although they have generally settled for less after negotiating.
One of the additional downward pressures on inflation has been this year's strengthening of the euro which is making imports as well as energy costs cheaper.
Nowotny said that could also reverse of its own accord, adding that the bank would not use extreme measures like currency market intervention.
"Again I'm not sure whether this might not be a case for some self-correcting market movements. I could imagine a situation where during this year there are some forces that could lead to an appreciation of the dollar again."
reuters.com
The ECB meets next month armed with new staff forecasts that for the first time will stretch out as far as 2016. Economists expect them to show inflation, currently running at just 0.7 percent, staying well below the bank's preferred level of just under 2 percent all the way out.
"One could expect that if the real economy is getting up and if we see that in Germany wage increases are quite substantial, there might be a certain self-correcting trend (in inflation)," Nowotny said, adding that it was too early to say for certain.
"So we will see whether this needs some specific action or whether ... there would be a merit for waiting."
Some German workers, backed by powerful unions, are calling for wage increases of more than 5 percent this year although they have generally settled for less after negotiating.
One of the additional downward pressures on inflation has been this year's strengthening of the euro which is making imports as well as energy costs cheaper.
Nowotny said that could also reverse of its own accord, adding that the bank would not use extreme measures like currency market intervention.
"Again I'm not sure whether this might not be a case for some self-correcting market movements. I could imagine a situation where during this year there are some forces that could lead to an appreciation of the dollar again."
reuters.com
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