The European Central Bank (ECB) will have to be prudent to gradually adjust its monetary stimulus to the economic recovery, said Mario Draghi, the president of the ECB, at the ECB Forum in Sintra, Portugal.
Draghi made it clear however that the current stimulus needs to remain in place as inflation dynamics remain "more muted than one would expect."
"We can be confident that our policy is working and its full effects on inflation will gradually materialize. But for that, our policy needs to be persistent, and we need to be prudent in how we adjust its parameters to improving economic conditions," Draghi said.
He added: "The current context where global uncertainties remain elevated, there are strong grounds for prudence in the adjustment of monetary policy parameters, even when accompanying the recovery. Any adjustments to our stance have to be made gradually, and only when the improving dynamics that justify them appear sufficiently secure."
"All the signs now point to a strengthening and broadening recovery in the euro area," Draghi, said recognizing the improvements. He also argued that the inflation dynamics aren't solid enough to exit the stimulus program.
According to him, "we are still in a situation of continuing slack, and where a long period of subpar inflation translates into a slower return of inflation to our objective. Inflation dynamics are not yet durable and self-sustaining. So our monetary policy needs to be persistent”.