Deflation dangers still lingering

While the crisis in Greece appears to have receded at least temporarily, the euro-zone still faces serious challenges in the form of weak growth and persistent deflation risks. As the Chart below shows, the recent weakness in oil prices and rise in the euro exchange rate haveopened up the possibility of a renewed bout of negative consumer price inflation in thecoming months, increasing the pressure on the European Central Bank to maintain or evenextend its policy stimulus.