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The ECB still needs to be patient and persistent with stimulus
as inflation is a "long way" from getting back to the ECB's 2
percent target, Praet told Belgian newspaper De Standaard,
likely hoping to temper expectations of an imminent policy
shift.
ECB President Mario Draghi stirred markets last week when he
argued that better growth in itself would provide increased
support, allowing the ECB to curb its own stimulus to keep the
overall level of accommodation broadly unchanged.
That message was taken as a signal that the ECB could announce
as soon as September a reduction in asset buys, already running
for over two years with the aim of reviving spending, growth and
eventually inflation.
"I see it more as an evolution in our communications," Praet, a
key Draghi ally said, according to an interview published on
Saturday. "The tone was rather optimistic regarding growth, and
rightly so."
"Now indeed inflation is picking up, but that is a process that
is a long way from completion," Praet added. "The process of
reflation is a long one that remains highly dependent on
accommodative monetary policy."
The ECB will decide in September or October whether to wind down
its 2.3 trillion euro bond buying scheme from next year or
extend the buys, having to resolve an apparent contradiction
between accelerating growth and subdued inflation.
"We need to be patient because inflation convergence needs more
time," Praet said. "And we need to be persistent, because our
baseline for future inflation remains crucially contingent on
very easy financing conditions."
"As the economic prospects brighten, higher expected returns on
business investment will make borrowing conditions increasingly
attractive," Praet said. "This will reinforce accommodation."
(Reporting by Balazs Koranyi; Editing by Richard Balmforth)
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