LUXEMBOURG (Reuters) - The European Central Bank needs to keep its policy options open in the face of growing economic risks, ECB policymaker Francois Villeroy de Galhau said on Thursday, warning against storing its crisis-fighting tools away too quickly.
Speaking in Luxembourg, Villeroy said that while the path towards monetary policy normalisation remained desirable, it must also be "gradual and pragmatic".
"We need to keep our options open... we are predictable, but not precommitted," said Villeroy, who is also head of France's central bank.
The ECB ended its 2.6 trillion euro (2.35 trillion pounds) crisis-era asset purchase scheme last month, but has said it will keep interest rates at record lows at least through the summer to support the economy and inflation.
Villeroy said there was no rush to detail further steps towards normalisation than those the ECB has already outlined, which also include plans to gradually reduce its stock of assets after the first rate hike.
"We do not need to give additional guidance on the timing or other details of the process until our next spring meeting, when we could be more precise about the sequencing according to the latest economic data," he said.
With growth broadly slowing, markets are pushing back rate hike expectations and scaling down bets on inflation returning to the ECB's two-percent target.
Money markets are now not pricing in an interest rate increase until mid-2020 <ECBWATCH> while inflation expectations are close to the lowest level since June 2017. <EUIL5YF5Y=R>.
Villeroy pushed back against recent suggestions that the ECB needed to take stock of crisis-era policy tools.
ECB policymaker Olli Rehn, who heads Finland's central bank and, like Villeroy, has been tipped as a potential successor to ECB chief Mario Draghi, said last month unconventional tools should be reviewed in light of recent experience and economic literature.
The euro zone's central bank last reviewed its policy strategy in 2003, when it changed its definition of price stability as an inflation rate below but close to 2 percent.
Villeroy said a review was not currently necessary.
"We will no longer use (all of the tools) once we have reached the 'new normal', but it is in our interest to keep them all to hand," he said.
"Clearly, our monetary policy will remain accommodative for as long as necessary to achieve our inflation target."
(Reporting by Leigh Thomas; editing by John Irish and John Stonestreet)