The ECB still plans to dial back stimulus at the end of the year, but inflation may rise more slowly than earlier expected, ECB president Mario Draghi has said.
The eurozone economy has slowed in recent months but Mr Draghi saw “no reason” to expect the eurozone’s economy to stop expanding.
But he warned of increased uncertainty around the outlook. “This would affect the speed with which underlying inflation picks up and therefore the inflation path that we expect to see in the quarters ahead,” he told a banking conference.
“Uncertainties surrounding the medium-term outlook have increased.”
The ECB would reassess the situation in December when new growth and inflation forecasts become available, he said.
The central bank plans to wind down its €2.6tn bond-buying programme at the end of this year and has guided investors to expect the first interest rate hike since 2011 sometime late next year.
Mr Draghi did not mention Italy in his speech but he warned about the risk of a widening in sovereign yield spreads. “If financial or liquidity conditions should tighten unduly or if the inflation outlook should deteriorate, our reaction function is well defined.
“This should, in turn, be reflected in an adjustment in the expected path of future interest rates.”