July 3, 2018 / 4:15 PM / 3 months ago

ECB's Praet confident of inflation recovery even after bond-buying ends

BUCHAREST (Reuters) - The European Central Bank’s chief economist said on Tuesday he was confident inflation in the euro zone would continue accelerating toward the ECB’s target of just under 2 percent even after the end of its massive bond purchases.

FILE PHOTO: European Central Bank (ECB) executive board member Peter Praet speaks during an interview with Reuters in Frankfurt, Germany, March 14, 2018. Picture taken March 14, 2018. REUTERS/Ralph Orlowski

Peter Praet set out the reasons for the ECB’s recent decision to stop adding to its 2.6 trillion-euro ($3 trillion) stock of bonds at the end of the year, after nearly four years of money-printing aimed at reviving price growth.

“The underlying strength of the euro area economy, together with well-anchored, longer-term inflation expectations, provides grounds to be confident that the sustained convergence of inflation will continue in the period ahead, even after a gradual winding-down of net asset purchases,” he told an event in Bucharest.

Euro zone inflation came in at 2 percent in June, according to preliminary Eurostat estimates. The ECB expects it to average 1.7 percent this year and in the following two.

The central bank said in June it would keep rates at their current record-low level “through the summer of 2019”, which investors took to mean that it would raise interest rates in September or October next year for the first time since 2011.

“Our enhanced forward guidance on the ECB’s policy rates underlines their pivotal role as the main tool for adjusting the monetary policy stance in the future,” Praet said.

France’s central bank governor Francois Villeroy De Galhau also struck an optimistic tone on Tuesday, saying in an interview with German daily Handelsblatt that growth remained robust despite worries over trade protectionism.

Reporting by Marinas Radu-Sorin; writing by Francesco Canepa in Frankfurt; editing by Andrew Roche

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