ECB’s Praet urges caution on next monetary planning

Bloomberg

The European Central Bank’s (ECB) outgoing chief economist has some parting words for his colleagues on the Governing Council: be careful when planning your future strategy.
Peter Praet, whose term ends this month, dived into the debate over whether the ECB needs to revisit its interpretation of price stability, which it sees as keeping inflation just under 2 percent. Consumer-price growth has fallen far short of that goal for years despite trillions of euros of stimulus.
“When some colleagues say you have to open the debate on the strategy, I say yes of course, you have to permanently think about looking at the lessons of the past,” Praet said at a Financial Times event in Frankfurt. But “when you announce it in public, it can be misread.”
The comments follow a call by Bank of Finland Governor Olli Rehn, a contender to replace Mario Draghi as ECB president in November, for a review of its strategy. The US Federal Reserve, which has also struggled to revive inflation, is currently undergoing a study of its own framework.
At the Frankfurt-based ECB, any overhaul could reflect on Praet’s eight years on the Executive Board, where he’s crafted measures including negative interest rates, massive bond purchases and bank loans to stoke price growth. Euro-area inflation was 1.7 percent in April — an improvement on the previous month but market expectations show little prospect of much pickup in coming years.