Inflation expectation stable: BBG

VIENNA: There is no reason to believe that inflation expectation has increased, European Central Bank Governing Council member Ewald Nowotny told the Bloomberg news agency.

His comments suggested the ECB may be able to keep rates on hold after two increases earlier this year. The central bank left rates unchanged this month.

"What we see is that inflation expectations are stable," Nowotny said in comments published late on Saturday. "For the time being, looking at oil prices and general demand, I do not see specific issues that could contribute to an increase in inflation expectations."

Nowotny, who was attending a conference of central bankers at Jackson Hole, Wyoming, said the "growth perspective is intact" for the eurozone and would provide a strong base for next year.

"Even if there is a slowdown, it won't mean recession," he told the agency.

Nowotny said it was important for European governments to ratify agreements to increase the size of their bailout fund to 440 billion euros ($631.8 billion) and to give it extended powers.

"The main challenge is to turn these decisions into actions

I am concerned by the delays we've seen in the political field," he said.

He did not think lending between European banks was grinding to a halt as in 2008 after the Lehman Brothers collapse.

"One should not over-estimate the situation," he said. "We are a way from a situation like that after Lehman. It is something to be observed, but not an immediate challenge."

Nowotny said earlier this month that a jump in bank deposits at the ECB was a concern.

Copyright Reuters, 2011