LONDON (AP) – The euro slid to a 4-1/2 year low against the dollar on Friday after the head of the European Central Bank hinted at plans to fight alarmingly low inflation across Europe.
In an interview with Germany’s financial daily Handelsblatt, Mario Draghi, the ECB’s president, said that the bank is more at risk of failing to keep prices stable than it was just six months ago.
“We have to avoid too-high inflation and we have to avoid too-low inflation as well,” Draghi said. “We are making technical preparations to alter the size, pace and composition of our measures in early 2015, should it become necessary to further address risks of a too prolonged period of low inflation.”
Traders sold euros and bought US dollars in response, driving the euro down 0.7 per cent to $1.201 as of 3.37pm Eastern time Friday. The euro hasn’t traded below $1.20 since June 2010. Back then, Europe’s financial markets were reeling as Greece, Ireland and other countries struggled under their debts.
For many in the markets, Draghi’s comments were a clear hint that the bank stands ready to launch a full-blown bond-buying programme similar to those undertaken by other central banks, such as the US Federal Reserve and the Bank of England. Many experts think the ECB could make the announcement at its next monetary policy meeting on January 22.