Faced with the risk of deflation, the European Central Bank (ECB) decided, on 9 January, to keep its monetary policy on hold. The Governing Council left the ECB's key interest rates unchanged in its first meeting of 2014, and did not adopt additional measures to tackle the low rate of inflation in the eurozone. However, ECB President Mario Draghi emphasised in a press conference that the ECB is ready to take "decisive actions if required" to invigorate consumption and investment in the region. Draghi said that accommodative monetary policy will continue "as long as necessary," and all available instruments "allowed by the treaty will be eligible". Although Draghi preferred not to be specific, these instruments could include an assets purchase programme, a negative deposit rate or new long-term refinancing operations (LTROs).
He set two conditions for ECB intervention in the markets: a tightening in short-term money market rates and/or a worsening of the medium-term inflation outlook. Pressure is...