ECB needs more evidence before deciding to cut stimulus, Jazbec says


© Reuters. Jazbec, Slovenia’s central bank governor, speaks during an interview in Ljubljana

By Francesco Canepa and Marja Novak

LJUBLJANA (Reuters) – European Central Bank policymakers need more economic evidence before they decide whether and how to reduce their monetary stimulus programme, ECB rate-setter Bostjan Jazbec said on Thursday.

After buying more than 2 trillion euros ($2.38 trillion)worth of bonds since 2015, the ECB is expected to announce next month it will slow the pace of its purchases, since economic growth is accelerating and inflation is stable, albeit sluggish.

Slovenian governor Jazbec highlighted the euro zone’s positive economic performance and said a decision was now inevitable. But he added policymakers were waiting for more economic data to confirm that inflation was indeed heading towards its mandated target of almost 2 percent.

“We are still closely monitoring all developments, which are clearly going the way we expected,” Jazbec said in response to a question about the bank cutting its bond purchases.

No decision was made at last week’s meeting, he said, “mainly because developments are in our view still not confirming the decision, which will inevitably follow. However, we need more data and more confirmation that what we are doing is in line with fulfilling our mandate.”

Speaking earlier at the same event in Ljubljana, Belgian governor Jan Smets said inflation seemed to have bottomed out. He noted, though, that the ECB rate-setters decided last week easy monetary policy was still needed.

Euro zone inflation is now reliably above 1 percent, and ECB President Mario Draghi said he expected it to reach the ECB’s target in 2020, after missing it since 2013.

But Draghi also emphasised uncertainty stemming from the euro’s rally against the dollar and other major currencies, which could affect inflation by making imports cheaper and exports dearer.

Jazbec played down this threat, arguing that the strong euro was evidence of the euro zone’s economic vigour.

“I would believe that strong euro is a reflection of robustness of growth development,” he said.

“Exchange rate developments are just confirmation of all the policies that we’ve been employing since 2014.”

($1 = 0.8403 euros)

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