MORNING BID EUROPE-Heads up from the ECB - deflation danger lurks

* A daily view from acting EMEA Money and Politics Editor Jeremy Gaunt. The views expressed are his own.

Aug 27 (Reuters) - It (Other OTC: ITGL - news) is pretty clear now that the European Central Bank has come to the realisation that its quantitative easing programme is not only not lifting inflation but that with China slowing down and commodity prices taking a dive the risk of deflation is worse.

The ECB's target inflation rate is close-to-but-just-under 2.0 percent. The current inflation rate for the euro zone is 0.2 percent.

The bank has been buying assets - mainly sovereign bonds - to the tune of 60 billion euros a month in its quantitative easing programme with the idea that such virtual money printing will make the euro plentiful and raise inflation.

Not yet, clearly.

Now (NYSE: DNOW - news) add oil prices tumbling around 40 percent since May and China's economy slowing (if not threatening to tank). Inflation is not going anywhere, expect maybe down.

Markets see deflation in a year. They also reckon that in five years time the prediction for five years after that will be for only 1.4-1.6 percent. (How in Adam Smith's name, did they come up with that?)

Peter Praet, the ECB's influential chief economist and executive board member, came as close as he could yesterday to 'doing a Draghi' and saying the ECB will do what it takes to fight this trend. What he said was: "There should be no ambiguity on the willingness and ability of the governing council to act if needed."

What this probably means is that the ECB will bring forward some of its planned spending - maybe 80 billion euros a month - and/or make a stronger pledge to keep going after the current programme is due to end around September 2016.

Next (Other OTC: NXGPF - news) week's monetary policy meeting may be too soon for a big change and it is possible that Praet was just firing a heads-up shot to markets and members of the broader ECB family who may not have been paying attention.

We will get another chance to hear about this from ECB executive board member Benoit Coeure, who is speaking in Paris today. (Editing by)