28 May 2003, 10:38  ECB's Issing says German deflation a possibility

HELSINKI, May 28 - European Central Bank chief economist Otmar Issing said on Wednesday the risk of deflation could not be ruled out in Germany, but that recent talk of a general decrease in prices was "less rational". Issing also told Finnish business daily Kauppalehti in an interview that the strengthening of the euro against the dollar was not worrying, and gave the ECB more room for manoeuvre in monetary policy.
"If we look at all the international organisations' forecasts, in these the easing of inflationary pressure is talked about but not deflation," Issing was quoted as saying by the paper. "If however we are speaking of individual countries, like Germany, no one can rule out the possibility that with the currently low inflation growth at some point the zero boundary will also be broken," he said.
Issing said the strengthening of the euro was natural given its previously low exchange rate, and became the latest ECB member to indicate this trend left the door open for easier credit in the euro zone. "It is absolutely clear that the slowing of inflation is linked to the euro's strengthening, and with this the monetary policy room for manoeuvre has also changed," he said.//

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