March 9, 2017 / 8:20 AM / 5 months ago

ECB should open door to exit stimulus now -German banking association

BERLIN, March 9 (Reuters) - The European Central Bank should on Thursday prepare the ground for an exit from its ultra-loose monetary policy, a German banking association said as the central bank gathered for a policy meeting.

The BdB private banking association said the fact that the threat of deflation has disappeared in the euro zone and inflation was picking up justified its recommendation.

"Such a step must be prepared very, very well" and policymakers should communicate it carefully, BdB head Michael Kemmer told Deutschlandfunk radio on Thursday.

"But it would be important, I think, that the ECB today opens the door to the exit (of its expansive monetary policy)," Kemmer said.

The comment was the second on the topic by the BdB this week. The association said on Monday that the upswing in the euro zone economy meant the ultra-expansive policy was no longer needed.

The ECB is on Thursday expected to resist calls to tighten policy as it casts a cautious eye ahead to high-risk elections in the Netherlands and France during an upsurge in populist, anti-establishment sentiment.

Germany is heading towards a tightly contested federal election of its own in September, and senior politicians there have repeatedly urged the ECB to start unwinding its expansionary policy.

But in rare praise of the central bank, Finance Minister Wolfgang Schaeuble said on Tuesday that the ECB was doing a good job in pursuing a policy that met the diverse needs of the euro zone's 19 member countries.

The ECB is expected to say on Thursday that underlying price growth remains weak and the economic recovery is still fragile. (Reporting by Thomas Seythal; Writing by Michael Nienaber; editing by John Stonestreet)

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