A Shop Window Along The Commercial Ermou Street In Central Athens
A woman looks at a shop window along the commercial Ermou Street in central Athens January 13, 2015. Greek consumer prices fell 2.6 percent in December, with the annual pace of deflation accelerating from a 1.2 percent drop in November, data from the country's statistics service showed on Tuesday. The sign in Greek reads "Sales". Reuters/Alkis Konstantinidis

The risk of deflation in Asia and Europe may be on the rise, according to a new report. Falling oil prices in the past few months is said to be one of the main reasons for the increased risk. Central banks of the affected countries are considering options to help their respective economies.

Oil prices that were over $100 in July 2014 are currently trading at around $48. According to a report by Bloomberg, the deflation risk is spreading from Europe to Asia. The risk is reportedly raising concerns about companies and consumers postponing their expenditure. Such a scenario may make the global economic recovery difficult.

The central banks in Asia are reportedly finding it difficult to follow an easy monetary policy. The report cites an analysis by Morgan Stanley that says companies in Asia have accumulated a lot of debt over the past few years. The huge debt may be stopping central banks in the region to take steps to contain deflationary risks in their respective economies.

India, South Korea, Indonesia, Thailand and the Philippines have reportedly kept the interest rates unchanged in the last month. China has cut its lending rate, but the country is reportedly holding back from taking more monetary measures for fear of increasing non-performing assets of banks.

Most Asian countries are major importers of oil. The fall in the commodity's price in the past few months is expected to push prices down in the region. But slow economic growth and deflationary risks are a cause for concern for investors. The Asian Development Bank has reportedly cut the growth forecast for the region for 2014 and 2015.

Deflationary risks are also a concern in Europe. According to a report by Reuters, concerns about economic slowdown and possible deflation are having a negative impact on Europe's stock market. According to the report, lower commodity prices could help the economy in the long run, but the global economy may not benefit from the low price of oil if there is a slowdown in economic activity or deflation.

According to the report, the European Central Bank's anticipated bond buying program may help contain deflationary tendencies in Europe. But the risks of low oil prices remain. The financial markets are reportedly under stress because of concerns about the "solvency and liquidity" of oil producers.

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