It looks touch and go whether the European Central Bank will add additional policy stimulus at the Governing Council meeting next Thursday. Having successfully navigated major threats to banks and sovereigns, the ECB is now facing a non-negligible risk that deflation may take root in the euro zone.

Although the just-released February’s euro zone consumer price figures are a bit stronger than expected, this hardly transforms the basic picture that inflation is well below the ECB’s 2 percent ceiling and inflation will likely stay very low or fall further, according to Capital Economics analyst Jonathan Loynes.

Euro area CPI inflation was stable at 0.8 percent in February, where it has been since December. This is marginally above the four-year low rate of 0.7 percent seen in October. Inflation had come down sharply to October’s low from 1.1 percent in September, 1.3 percent in August and 1.6 percent in July 2013.

February’s results “certainly don’t rule out further policy action from the ECB next week,” Loynes said. “Not only is there still a large degree of slack in the economy, but the strength of the euro is bearing down on import prices.”

Much will likely depend on whether the ECB staff’s new forecasts show euro zone consumer price inflation still below 2.0 percent in 2016, according to Howard Archer of IHS Global Insight. “Any future spike up in euro zone money market rates would also likely trigger ECB action over the coming months,” Archer said.

Meanwhile, the continued high level of unemployment across the single-currency bloc (unchanged at 12 percent in January) will ensure that wage pressures remain subdued.

While unemployment for January was down from a record high of 12.1 percent seen between April and September 2013, it was still up from 11.9 percent at the end of 2012 and a low of 9.9 percent in the early months of 2011.

“The euro zone jobs problem is far from over as unemployment remains damagingly high and it seems unlikely to come down markedly for some time to come,” Archer said. “Economic activity will likely remain too limited in the near term at least to generate many jobs.”

Loynes said, “Add in the recent further falls in liquidity in the banking sector and the likelihood of further rises in the euro in the event of inaction and we still think there is a very good chance of either a small interest rate cut or possibly even some form of quantitative easing next week.

“February’s inaction was not a signal that the ECB has run out of policy ammunition or is unprepared to deploy its remaining weapons,” Loynes added. “Rather, the decision appeared to be mainly driven by matters of timing.”