Bank of Spain Official: ECB must act in December to avoid risks of deflation

The European Central Bank (ECB) must announce additional monetary policy easing in December to avoid the risk of deflation in the Eurozone, Oscar Arce, the Spanish central bank’s Chief Economist said in an interview in Madrid late Tuesday.

Key quotes (via Bloomberg)

“We know that in order to ensure such a risk doesn’t materialize, we must act swiftly and forcefully.”

“The prospect of an entrenched decline in prices stalks the entire currency bloc and not just Spain.”

“We are seeing an increase in the portion of goods whose prices are increasing very little or falling, which is an indication of the risk.” 

Market reaction

EUR/USD extends its 20-pips range play above 1.1800 into the European open, as markets digest the latest vaccine euphoria amid coronavirus escalation globally. Focus shifts to a flurry of speeches by the ECB policymakers, including President Christine Lagarde.