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The ECB is slowly dialing back stimulus and plans to end a 2.6
trillion euro bond purchase scheme next month, raising some
concern that it is cutting support just as the real economy is
weakening.
Praet acknowledged the slowdown but argued that the economy is
still expanding, inflation pressures are building, the oil price
fall would help growth and many of the growth risks are outside
the ECB's control because they are related to global politics.
"Factors related to protectionism, financial market volatility
and vulnerabilities in emerging markets are creating headwinds
that are becoming increasingly noticeable," Praet told a
conference.
"Surveys of euro area business activity and sentiment indicators
have softened perceptibly relative to their earlier highs,
although they remain in expansionary territory and are still
above long-term averages for most sectors and countries," he
added.
Brent crude <LCOc1> has fallen to $60 a barrel from almost $87
in early October, a drag on inflation but a boost to growth as
the euro zone is a net importer of energy.
He also argued that the ECB is not removing support by ending
bond purchases but simply 'rotating' instruments from
unconventional to more traditional tools.
Even when bond buys end, the ECB will continue to reinvest cash
from maturing securities for an 'extended period' of time, a
phrasing markets estimate will be around 2 to 3 years.
Praet declined to discuss a more precise definition for this
time frame but said that the ECB would have to do this at its
next meeting on Dec 13 and may say more about how long
reinvestments would go on.
(Reporting by Balazs Koranyi; Editing by Matthew Mpoke Bigg)
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