If the European Central Bank has one monetary dragon it considers essential to slay, it is inflation.

Keeping inflation under control is the central bank’s primary legal responsibility, and as Europe struggles to overcome economic problems caused by the sovereign debt crisis, inflation has remained the bank’s primary focus.

But some economists say it has become a driving obsession that has blinded the bank to a potentially bigger threat to Europe: deflation.

The central bank’s doubters grew louder after it made a big show of taking measures to cancel out the supposed inflationary impact of the government bond purchases it began on May 10 to help keep Greece and several other euro zone countries from defaulting on their debts.

“It’s nuts: how can they be concerned about the inflationary impact of this?” said Carl B. Weinberg, chief economist of High Frequency Economics in Valhalla, N.Y. “If I were the head of the E.C.B., I would be printing money to avert the decline in the money supply.”

Many economists regard deflation as more dangerous than inflation, because it prompts consumers to delay purchases as they wait for lower prices, creating a downward spiral of lower demand and production. More here.