European Central Bank chief economist Peter Praet warned his colleagues on the ECB governing council saying that they should be careful while planning their future strategy.
Everything began when the Bank of Finland Governor Olli Rehn asked the European Central Bank to review its strategy which currently requires keeping the inflation level below 2 percent.
“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,” said Praet, adding that announcing the debate in public can be misread by the economic actors.
The ECB has devoted great efforts to stimulating price growth, like imposing negative interest rates, purchasing bonds on a large scale, spending trillions in economic stimulus and boosting bank loans. Despite this, it has failed to fulfill its commitment of stabilizing the economy.
The debate, which was held in a Financial Times event in Frankfurt, was also over whether central banks are at the limits of their toolbox.
Praet declined to characterize his eight-year mandate, which is about to end this month, as unsuccessful while approving Federal Reserve Chairman Jerome Powell’s approach, saying that is “right to be very careful -- it’s not a revolution.”
Praet was recently reported saying that the multi-tier ECB deposit rate needs a monetary policy case. The bank is currently studying the possibility of granting relief to commercial banks from some of the charges associated with its -0.4 percent deposit rate in order to protect the transmission of its policy.
Praet was named the ECB's head of the economic department eight years ago after years trying to join the central bank board. His mandate is now expiring, together with Mario Draghi's, which is finishing on October 31. The Central Bank of Ireland Governor Philip Lane will soon replace Praet as the ECB chief economist.