FRANKFURT/MILAN (Reuters) - The European Central Bank’s chief economist stood by the ECB’s pledge to keep its policy easy after comments by other rate-setters raised questions about the bank’s next moves.
In a newspaper interview published on Friday, Peter Praet also took on euro-hostile movements in Italy, saying they were misleading people and hiding the fact that reverting to the old currency would involve huge costs for the population at large.
The ECB has said it would continue buying bonds until at least the end of the year and keep interest rates at current record lows or even cut them until “well past” that point.
“Our forward guidance has served us well and led to financial conditions that are appropriate,” Peter Praet told Il Sole 24 Ore. “We reiterated it ... in the Governing Council.”
Austrian governor Ewald Nowotny said the ECB would decide at a later time whether to raise rates before or after its bond-buying program comes to an end. His Italian peer Ignazio Visco said the time between the end of the purchases and the first rate hike could be shortened.
“We do not give a date for when that will be,” Praet said. “The Governing Council will decide in due course how long that ‘well past’ will be.”
Praet also emphasized slow wage growth and said the ECB would have to be “patient”.
“Wage evolutions...may reveal that there is more slack in the euro area labor markets than unemployment rates show,” Praet said.
“We have to be patient.”
In Italy-related remarks, the ECB policy maker took issue with the anti-euro slant of some Italian opposition parties.
“The nostalgic idea that everything will fall into place by simply going back to the lira is misleading people,” Praet said.
“The cost of changing the monetary regime will be huge and the low-income part of the population will suffer the highest cost.”
In Italy the support for anti-establishment movement 5-Star Movement has been surging and opinion polls recently suggested it may win 2018 elections.
5-Star’s White Paper for Europe calls for legal procedures to allow countries to leave the euro zone and a permanent opt-out clause for any country that wishes to be a member of the EU but not join the euro.
Reporting By Francesco Canepa and Francesca Landini; Editing by Hugh Lawson/Jeremy Gaunt