ECB's Praet says QE will help fend off damaging deflation

BERLIN (Reuters) – European Central Bank Executive Board member Peter Praet defended the ECB’s decision to buy government bonds in an interview published on Saturday, saying it took pre-emptive action to prevent a deflationary spiral in the euro zone.

“If inflation in the euro zone were to rise to 4 percent, everyone would expect the ECB to do something about it. So the ECB also has to act when inflation falls to zero percent,” he told Saturday’s edition of Germany daily Sueddeutsche Zeitung.

Praet said deflation was “a vicious circle that leads to economic collapse and a rise in unemployment. That’s what the Great Depression of the 1930s in the United States taught us”.

“Foresight is better than hindsight,” Praet said, adding that he expected the ECB’s decision to contribute to positive growth developments in the euro zone economy in coming months.

Consumer prices in the 19-member euro zone were 0.6 percent lower year-on-year in January, according to preliminary data from the European statistics office on Friday.

(Reporting by Stephen Brown; editing by Andrew Roche)

ECB's Praet says QE will help fend off damaging deflation