one we have today, any change in the policy stance must be prepared carefully and implemented very gradually. and such a change must also be supported by sufficient evidence that growth is translating into a path of sustained adjustment in inflation towards below, but close to 2 %. ” so you ’ re not yet seeing a sustained rise in inflation? praet : “ inflation has recently been quite volatile. we ’ ve always maintained that we should look through short - term volatility. that ’ s why what counts most now is underlying inflation, for example core inflation ( inflation excluding the more volatile elements, such as energy, ed. ). and that ’ s still on the weak side. in recent months we ’ ve seen producer prices rising worldwide, and now even in europe somewhat. in the past, the pass - through from producer prices to consumer prices for non - energy industrial goods, an important component of core inflation, typically took one to two years. we ’ ll have to wait and see how fast it will go this time. we are also looking at prices in the services sector, which are to a large degree determined by wages. in the past, we have sometimes overestimated wage inflation, as we failed to properly factor in people who gave up on the job market or those forced to accept part - time rather than 1 / 4 bis central bankers'speeches full - time jobs. but we now have a better picture of underutilisation in the economy, which is greater than the official unemployment figures would have us believe. recently, the gap between that broadly defined unemployment and the traditional measure has begun to narrow. that suggests people are returning to the job market. over the next couple of years the pressure on wages should start to feed into inflation. things are evolving in the right direction. we ’ re not trapped in a low inflation environment. ” you ’ re happy that inflation is returning? praet : “ we currently have increased confidence in the path of inflation that we have outlined in our forecasts. but before we can start scaling back our policy, even gradually, we ’ d like to see further confirmation. we believe that the output gap ( the gap between potential production and real production, ed. ) will have closed by 2019, and that price pressure will follow as a result. however, for the time being, economic developments are still dependent on very favourable financing conditions, for which monetary policy plays a very important role. but there are other factors too. financial conditions

peter praet : interview in trends / tendances interview with mr peter praet, member of the executive board of the european central bank, in trends / tendances, conducted by mr daan killemaes and mr jasper vekeman on 4 may 2017 and published on 11 may 2017. * * * so let ’ s kick off straight away with the topic of the moment : the risk of deflation has subsided, the economy is recovering, political risk is on the wane … isn ’ t it time …? peter praet : ( interrupts ) “ yes, political risks are diminishing, yet policy uncertainties still persist – brexit, for example. we ’ ve seen how negotiations can swing very fast from one side to the other. and as far as the economy is concerned, there ’ s still a wide array of risks. they ’ re moving towards a more balanced configuration, but are still tilted to the downside. for the first time in many years, we ’ re seeing a synchronised recovery of the world economy. but two key points deserve mentioning here. the first is that the euro area recovery is not yet sustainable without support from our monetary policy. in addition to monetary support of the recovery, structural reforms are necessary for sustainable growth over the medium to long term. the second point is that confidence indicators, the soft data, tend to be stronger than the hard figures. to accurately assess the level of monetary support that is still needed, it ’ s important to have a confirmation of confidence indicators in hard data. ” given this uncertainty, do you think it ’ s too early to start reducing policy support? praet : “ let me start with the good news, and that is that our monetary policy is working. am i being too triumphalist? that ’ s a matter for discussion, but our policy has undeniably played a key role in avoiding deflation and supporting the economy. and for the first time in many years, growth is now being driven primarily by domestic demand, and in particular private consumption. so the argument that our policy is leading people to hoard their money is unfounded. and the argument that people are actually saving more due to negative real interest rates doesn ’ t hold either. ” so why the caution about which policy direction to follow? praet : “ the last time we tightened our policy was 2011. after a long period of accommodative policy such as the