BERLIN (Reuters) - European Central Bank policymakers will discuss adjusting but not ending the ECB's economic stimulus in light of stronger growth, keeping in mind that markets can over-react to any change, ECB chief economist Peter Praet said on Thursday.
With growth on a solid run and unemployment falling rapidly, the ECB is expected to announce next month that it will cut its money-printing programme from next year, with the debate focusing on just how bold its next move should be and whether it should provide a roadmap to ending bond purchases.
Praet said normalising monetary policy should not create any particular shock to the economy but warned that the ECB needed to move with prudence and that it remains far from lifting inflation back towards its target.
"Things are going on the real (economy) side much, much better," Praet told a conference in Berlin. "But the job is not yet done. Now we are talking about recalibration. The end of the story is not yet written."
The ECB is buying 60 billion euros worth of bonds a month to keep borrowing costs low and encourage investment and spending. Markets expect purchases to be cut to 40 billion euros a month from January and see them ending by the close of the year.
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Currency market volatility is seen at the biggest risk to the ECB's timeline as any big euro rise would dampen the inflation outlook, reversing the ECB's work.
The euro is up 12 percent against the dollar this year but has eased back in recent weeks, partly on expectations that any ECB policy change will be incremental.
"We know that markets can over-react. That is why we are prudent," Praet said. "How prudent? ... That is the debate we have in the governing council."
(Reporting by Reinhard Becker; Writing by Balazs Koranyi; Editing by Francesco Canepa and Catherine Evans)
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