Wednesday September 23, 09:46 AM
UPDATE 1-Kranjec sees H2 inflation near ECB benchmark
LJUBLJANA, Sept 23 (Reuters) - Euro zone inflation in the second half of the year will be close to the European Central Bank's benchmark of just under 2 percent, Governing Council member Marko Kranjec was reported as saying on Wednesday.
ECB staff project average inflation this year of between 0.2 and 0.6 percent, and next year of between 0.8 and 1.6 percent.
Annual inflation has been negative for three straight months, although economists and the ECB expect a rebound into positive territory to start soon.
'There are signs that the falling of prices is calming down or has already stopped so we expect inflation in the second half of the year which will be close to our price (stability) goal,' Slovenian news agency STA quoted Kranjec as saying.
'Inflation expectations are very firm, we expect that this year and in the following years prices will grow between one and two percent a year, which is in line with our goal.'
The ECB's price stability goal is medium-term inflation of below but close to 2 percent, and economists see it keeping rates at the current record low 1 percent for another year.
Kranjec said the ECB also saw the risk of deflation in the euro zone as small.
'At the ECB Governing Council at the start of September we clearly said that deflation danger is relatively small.'
'Prices have been falling but this has not changed inflation expectations into deflation ones,' he added.
The Slovenian central bank was not immediately able to confirm the quoted comments.
L-SHAPED RECOVERY SEEN
Austria's Ewald Nowotny said that the ECB saw neither inflation nor deflation, and the recovery would be slow.
'Instead of a V-shaped recovery we will see an L-shaped one, sharply down and then very slowly up,' he was quoted as saying by the Salzburger Nachrichten newspaper.
Kranjec joined other policymakers in calling for improved financial regulation, a key topic at a Group of 20 summit later this week.
'Probably there will be decisions on changed institutional structure, a bigger role of the International Monetary Fund and of the Financial Stability Board, while a European Systemic Risks Boards will be established. The ECB will play an important role as it will ensure information and administrative support,' he said.
'It is my personal opinion that the financial industry has been growing too fast on a speculative basis and that it is high time that financial regulation becomes sharper.'
(Additional reporting by Boris Groendahl in Vienna, writing by Marc Jones and Krista Hughes)
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