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ECB's Hansson: ECB needs to move very gradually in normalisation

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(Reuters) - zone will eventually pick up as the grows, but the needs to remain patient and remove its stimulus only very gradually, ECB policymaker Hansson said on Wednesday.

The ECB has kept interest rates extremely low and been printing money and buying bonds with it for three years to pump cash into the financial system and help revive But policymakers are now debating how to claw back that support and whether to wind down its lavish bond purchases later this year.

"Some people say err on the side of caution; let's wait and wait," Hansson said in a lecture at the SAFE institute in "But the risk there is that you wait too long and you're forced to do a bit of catch up."

"All these changes have to be very gradual and the ECB has a very strong track record in doing things in a gradual and predictable fashion," Hansson said.

On Tuesday, ECB policymaker pushed up the and zone bond yields when he told in an interview that he would have "no problem" lifting the bank's deposit rate to -0.2 percent from -0.4 percent as a first move towards normalising its monetary policy.

Markets now expect the ECB to stop buying bonds by the end of the year, then raise interest rates for the first time since 2011 sometime in the second quarter of next year, even as remains short of its target of almost 2 percent.

"The recent low in the area has been the result of a combination of factors," Hansson said in a lecture. "Most of them are of a temporary nature and their impact will weaken over time.

"Therefore we need to be more patient in achieving our price stability goal," he said, referring to the ECB's process of removing and normalising policy.

Hansson said he took comfort in the relative stability of the ECB's projections, which has shown an upward path in consumer prices over the coming years.

(Reporting by Balazs Koranyi; Editing by and Hugh Lawson)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, April 11 2018. 18:14 IST
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