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

only in germany. we will keep explaining to our critics in germany – and also to german savers – that their country is one of the main beneficiaries of the euro. a stronger euro area, with inflation of below but close to 2 %, would be good for germany. as for the debate we may have from time to time with some academics in germany, i would say there is a certain irony in them taking us to task because we are focusing on our inflation target, since it is at germany ’ s insistence that the ecb was given that mandate – and that mandate only – in the euro ’ s founding treaties, and in my view rightly so. bis central bankers ’ speeches did the euro ’ s jump after your announcement on march 10 disappoint you? it doesn ’ t help your return - to - inflation goal … the ecb, as you know, doesn ’ t have a foreign exchange target. what i saw is that financial markets in general understood what we did, which is more important than the instant reaction of forex operators. the dollar / euro exchange rate is mostly driven by different monetary policies in the united states and europe. what would be more worrisome for us would be a further decline of emerging countries ’ currencies, and increased volatility of the pound sterling due to the eu referendum debate in the united kingdom. does the ecb have a plan for a possible “ brexit ”? i don ’ t want to meddle in a decision that is for the british people to make. however, as a citizen and a european, of course i want the united kingdom to remain in the european union, to which it brings so much. that said, it is normal for us to prepare for any possible scenario, and its impact on euro area banks. if the other scenario prevails and the united kingdom remains in europe, were you reassured by the results of the brexit negotiations between london and its partners? we had two main concerns. one was to make sure that the discussion would not make further euro area integration more difficult. the second was that it wouldn ’ t fragment the single market for financial services and strip the capital markets union project of its substance, notably the single rulebook for financial regulation. the final agreement is a balanced one and we have been reassured, even though ambiguities remain, of course. bis central bankers ’ speeches