June 13, 2017 / 2:52 PM / 2 months ago

ECB's Smets: growth should yield more inflation, but yet to see it

BRUSSELS, June 13 (Reuters) - Stronger growth in the 19-country euro zone should lead to higher inflation, but policymakers have yet to see it, European Central Bank Governing Council member Jan Smets said on Tuesday.

The Belgian central bank governor told a news conference in Brussels that the ECB needed to see a sustainable adjustment of inflation towards its target of almost 2 percent before it would scale back its monetary stimulus.

"We are looking for a sustained adjustment of the path of inflation. That is the single most important thing we should look at," he said, recognising that growth was strong.

"It's true too that the better economic environment is, let's say, something which is positive as it should in theory lead to more confidence in having a spontaneous spark of more inflation."

"But the question is and the issue is that we are not seeing, that we have not been seeing this right now in a sufficient way," he said, adding that explanations could include more labour supply, more migration, more flexible contracts and the impact of structural reforms of the labour market.

Smets added that the ECB is keen to see more tangible signs of domestic inflationary pressures, which would persist even without the bank's stimulus. (Reporting By Philip Blenkinsop; Editing by Balazs Koranyi)

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