Risk to ending econ stimulus too soon, too late -ECB's Paramo - News

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Risk to ending econ stimulus too soon, too late -ECB's Paramo

By: AFX | 06 Nov 2009 | 12:17 PM ET

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LONDON, Nov 6 (Reuters) - Central banks cannot exclude the risk of exiting from non-conventional economic stimulus measures too soon or too late, European Central Bank Executive Board Member Jose Manuel Gonzalez-Paramo said on Friday. In a speech delivered in London, he said the key principles of how to phase out existing measures should be timeliness and gradualism, echoing comments made by ECB President Jean-Claude Trichet on Thursday. The ECB held rates at a record low 1.0 percent on Thursday, and market participants have been speculating when the ECB will phase out measures to flood the market with cheap and abundant funds to boost bank lending. Gonzalez-Paramo said choosing the right time to end loose monetary policy would be challenging. "Identifying the right moment in time to start a tightening phase is difficult under normal conditions, and even more so when the assessment of risk is, as in the current environment, surrounded by heightened uncertainty," he said. "Exiting too late is dangerous because the public may lose faith in the central bank's commitment to low inflation," he added. (Reporting by Nigel Davies and Naomi Tajitsu; Editing by Andy Bruce) Keywords: ECONOMY ECB/GONZALEZ (naomi.tajitsu@reuters.com; +44 207 542 5830; Reuters Messaging: naomi.tajitsu.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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