FRANKFURT?A top European Central Bank official called for a cautious approach to exiting the ECB's ?1.7 trillion ($1.8 trillion) stimulus, reinforcing investor expectations that the ECB will signal extending its bond-purchase program beyond March.

"The fragility of the recovery calls for very cautious action," Yves Mersch, who sits on the ECB's six-member executive board, said at a financial conference. He pointed to the eurozone's still-weak growth and inflation rates, as well as political risks.

"Low interest rates and [easy-money] policies remain appropriate in the current environment," Mr. Mersch said.

ECB policy makers are expected to decide at a meeting on Dec. 8 whether to extend their ?80 billion-a-month bond-purchase program, which is set to expire inMarch.

With inflation just 0.5% in the 19-nation eurozone last month, far below the ECB's target of just under 2%, most economists expect the bond-purchase program to be extended by at least six months.

Mr. Mersch said little to damp such expectations. "Growth is still hesitant and the inflation path isn't sustainable," he said, stressing that any changes to the ECB's policies will "take time."

The comments "highlight the will at the ECB Governing Council to preserve the monetary policy stimulus for some time, given the subdued core inflationary dynamics," said Gizem Kara, an economist at BNP Paribas in London.

Mr. Mersch also warned of "many uncertainties?in the public sector" in Europe this year and next. France and Germany will both hold national elections next year, while Italy is preparing for a key referendum in early December, on which Prime Minister Matteo Renzi has staked his political future.

Still, the ECB official cautioned against excessive expectations for the coming meeting, and said the bank's next set of economic forecasts are likely to show inflation "very close" to 2% by 2019.

Policy makers will discuss in December how to prepare for a change in communication and policies, he said. And while the ECB isn't yet ready to signal it won't cut interest rates again?an option it has left open?"we're probably not very far from being able to make such a statement," he said. Policy makers will discuss in December how to prepare for a change in communication and policies, he added.

The ECB's policies, comprising large-scale bond purchases and subzero interest rates, have their critics. Banks complain that negative interest rates undermine their profits and could harm their ability to lend, because they can't easily be passed on to customers.

Mr. Mersch acknowledged such concerns, and said the ECB shouldn't drag out its policies for too long, to avoid jeopardizing its credibility.

With ECB policy makers increasingly warning of negative side effects, Ms. Kara said, the central bank might decide to extend its bond purchases, but at a slower pace??60 billion a month, say.

"In this way, the ECB would signal that there is some progress in the right direction, without indicating a firm end to the program," she said.

European bank stocks are down around 10% this year amid concerns around their profitability in an environment of low interest rates. According to ECB calculations, a 10% drop in banks' stock prices slows their corporate lending by about 0.5 percentage point, Mr. Mersch said.

"The necessary adjustments of our policies and our rhetoric shouldn't be dragged out [but] nor should we rush," Mr. Mersch said.

Within the ECB's 25-member governing council, Mr. Mersch is generally seen as a hawk, which means he is more concerned about fighting inflation than stimulating growth.

Write to Tom Fairless at tom.fairless@wsj.com and Hans Bentzien at hans.bentzien@wsj.com

(END) Dow Jones Newswires

November 17, 2016 06:35 ET (11:35 GMT)

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