The European Central Bank appears to be increasingly on the defensive, stepping up efforts this week to counter criticism of complacency after it held interest rates steady again this month.
A whole range of top ECB officials -- from president Mario Draghi to chief economist Peter Praet and the newest executive board member Sabine Lautenschlaeger -- have felt compelled to defend the decision not to ease monetary conditions any further, despite an alarmingly low level of inflation.
The ECB last cut its key "refi" refinancing rate to 0.25 percent in November but has not taken any additional measures since, despite concerns the single currency area could slip into deflation.
Deflation is a widespread decline in prices which can lead to consumers delaying purchases. It can trigger a destructive spiral where companies forced to cut prices also cut wages and lay off workers, leaving consumers with less money to spend and the entire economy worse off.
"Acting just for the sake of acting makes no sense," said Sabine Lautenschlaeger, who joined the ECB's executive board in January.
"I reject it if someone says we are complacent. There was no strong reason to act," Lautenschlaeger said in her first newspaper interview since taking up her position.
The ECB's chief economist Peter Praet similarly rejected suggestions that the central bank was "behind the curve" and under-estimating the dangers of deflation.
"We have a clear view of the situation and we will act when necessary," Praet insisted at a central banking conference.
"At present, risks of deflation ... are quite limited," said ECB chief Mario Draghi.
But Draghi also insisted that the ECB has been preparing "additional non-standard monetary policy measures" and would take "decisive action" if needed.
- No easy options -
Given the ECB's pro-active fire-fighting role throughout the eurozone crisis, central bank watchers said they are convinced that Draghi and his team are not suddenly being complacent.
Rather, with interest rates close to zero, the bank's options were more limited, analysts said.
"Conducting monetary policy is simply not as easy as some analysts think," said Carsten Brzeski at ING DiBa.
Tools that other central banks had at their disposal -- such as quantitative easing or the purchase of asset backed securities -- would be either "very hard (for the ECB) to implement, highly controversial and it is far from certain whether they would really work," Brzeski said.
"All of this leaves the ECB with only one last option and this is a rate cut. But as long as the macro-scenario predicts a gradual recovery and low inflation is mainly driven by energy prices, there is no reason for the ECB to act," Brzeski said.
RBS economist Richard Barwell also felt that the ECB's hands were tied.
Its apparent reluctance to act was because the ECB's governing council "has run out of easy options, not that it is indifferent to low inflation," Barwell said.
Natixis economist Sylvain Broyer pointed out that with most data pointing upwards, "why take additional action which won't have any effect?".
UniCredit economist Erik Nielsen noted an "asymmetry" which has emerged in the ECB's reaction function.
If the situation were reversed and the eurozone were facing inflation above the ECB's target, "I don’t think there could be any doubt whatsoever that the ECB would have hiked interest rates to bring about a bit faster cooling of the economy," Nielsen said.
- Strong euro a problem -
Analysts said the rising euro -- which last week touched its highest level since late 2011, closing in on $1.40 -- could increasingly become a headache and may even force the bank's hand.
While the ECB has no official exchange rate target, a strong euro can harm exports and also push inflation still lower.
Draghi admitted that the exchange rate was becoming "increasingly relevant" in the ECB's assessment of price stability.
Berenberg Bank chief economist Holger Schmieding said he shared the ECB's optimism about the outlook for recovery.
"We see no need for the ECB to add a further monetary stimulus," he said. "If the economic upswing were to falter unexpectedly, the ECB would have to react. But if the economy stays on track, the ECB can stay put."