•  Second, low inflation rates in the euro area are partly the result of necessary adjustments in the crisis-hit countries. These should also be one-off effects. •  Third, there are no signs of a self-enforcing downward spiral of prices and wages. Long-term inflation expectations are firmly anchored at a level that is in line with the ECB’s definition of price stability.
Private households do not seem to be postponing expenditure in expectation of a further drop in prices. There are no indications of a substantial increase in the savings rate. Thus, while the euro area is certainly in a period of very low inflation, the risk of deflation is very limited. Nevertheless, we are watching the developments closely.