FRANKFURT (Reuters) - All conditions are in place for euro zone inflation to rise but the European Central Bank should still remove stimulus with caution to avoid undue market turbulence, ECB board member Yves Mersch said on Monday.
“All prerequisites for a sustainable adjustment of inflation to our objective are given,” Mersch said in Frankfurt, referring to the ECB’s inflation target of almost 2 percent.
He added that as the inflation outlook improves, the ECB can gradually reduce its bond purchases, but should still maintain loose monetary policies to continue supporting the rise in consumer prices.
Mersch, considered a hawk on the rate-setting Governing Council, added that moving too late to curb stimulus risked making the bond purchases ineffective while clawing back support too quick could lead to excessive market reactions that would undo he ECB’s work.
Reporting by Balazs Koranyi; Editing by Alison Williams