A price slowdown could turn into a negative spiral that derails the recovery in the euro region. While the 17-nation economy exited six quarters of recession in the three months through June, it still has record unemployment and shrinking bank lending.
“The ECB has become unusually tolerant of low inflation, even by its own standards,” said Greg Fuzesi, an economist at JPMorgan in London. “The argument for inaction is becoming more stretched, however. The refinancing rate cut is the simplest option in the near term.”