Departing Honohan urges ECB to keep foot on stimulus pedal

By Padraic Halpin

DUBLIN (Reuters) - There are signs that the European Central Bank's quantitative easing program is producing results and the bank needs to keep its foot on the stimulus pedal, departing ECB governing council member Patrick Honohan said on Wednesday.

Speculation of further easing from the ECB at its next policy meeting on Dec 3. has grown since President Mario Draghi indicated in October that the bank's Governing Council would act if needed to drive up inflation towards its near-2 percent target, a view echoed by several other policymakers.

Alternatives open to boost a virtually stagnant euro zone economy include snapping up the bonds of towns and regions or introducing a two-tier penalty charge on banks that park money with the ECB, according to officials.

"I think we can see results, not a huge bounce back to a 2 percent inflation rate, but I think if we didn't have it we would be looking at a worse situation," Honohan told journalists on his last day as Irish Central Bank Governor before retiring.

"Even though there are signs of a better recovery, inflation forecasts are still not moving up and therefore definitely they need to keep the foot on the accommodation pedal."

After inflation of just 0.1 percent last month, a Reuters poll of economists on Wednesday suggested the ECB will ease policy in some way or other on Dec. 3.

Draghi must find a compromise that will win the blessing of a majority of the 19 central bank heads around the euro zone, and Honohan said it had been "very difficult" for the bank to set up its initial round of money-printing.

Honohan, who will be succeeded by fellow economics professor Philip Lane, said he was firmly in favor of the initial move.

The bank has been buying around 60 billion euros ($63.5 billion) of assets a month since March, a program scheduled to run until next September.

(Editing by Conor Humphries and John Stonestreet)

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