ECB sticks to policy plan despite German call for tightening

By Francesco Canepa

FRANKFURT (Reuters) - The European Central Bank will stick to its policy plan including bond buying and record-low rates for some time to come as it is not yet convinced the euro zone economy is back to rude health, three of its top policymakers said on Thursday.

Comments from Mario Draghi, Peter Praet and Vitor Constancio suggested the ECB would not change its policy message this month despite mounting calls from Germany for it to wind down its stimulus. The remarks match a Reuters report last week.

ECB President Draghi said he saw no need to deviate from the bank's stated policy path, which includes bond buying at least until the end of the year and rock-bottom rates until well after that to stimulate inflation.

"I do not see cause to deviate from the indications we have been consistently providing," Draghi said at a conference in Frankfurt.

"Before making any alterations to the components of our stance - interest rates, asset purchases and forward guidance - we still need to build sufficient confidence that inflation will indeed converge to our aim," he said.

Price growth in the euro zone has rebounded in recent months and was at 1.5 percent in March. The ECB targets inflation of almost 2 percent.

This has fuelled market speculation the ECB might raise its deposit rate, which is -0.4 percent, meaning banks are charged on their excess deposits.

This is especially painful for cash-rich countries such as Germany and the Netherlands, where central banks have already signalled their uneasiness.

Speaking in Berlin on Thursday, Germany's central bank president, Jens Weidmann, said it was legitimate to start discussing when and how the ECB would crimp stimulus, and the head of Germany's banking lobby called for it to end soon.

But ECB Vice President Vitor Constancio told a summit in Malta later in the day that it was too soon to declare victory in the bank's efforts to lift inflation.

And ECB chief economist Peter Praet said even introducing the notion of a rate hike would undo some of the economic stimulus brought by the ECB's asset purchases.

"If investors start perceiving that the path of the policy rate is subject to upward uncertainty ... long-term interest rates will be pushed higher and asset purchases will become less effective," Praet said at the Frankfurt conference.

Indeed, ECB rate setters discussed removing a reference to the possibility of further rate cuts from their policy message when they met in March, but they decided against it for fear of upsetting financial markets.

The ECB is on course to buy 2.3 trillion euros ($2.5 trillion) worth of assets in a bid to boost lending by flooding the euro zone with cash.

Lending to households and companies is still growing at a slower pace than before the financial crisis.

(Editing by Louise Ireland)