ECB has easing bias, not out of ammunition: Praet

(Reuters) - The European Central Bank's forward guidance on low interest rates includes an easing bias and further cuts are an option if warranted by the inflation outlook, ECB policymaker Peter Praet said in a paper published on Tuesday.

Praet, who has the influential economics portfolio among his tasks on the ECB's Executive Board, told policy research portal Vox that the ECB has "not run out of ammunition".

ECB President Mario Draghi left markets uncertain last week about the chances of another cut, but Praet stressed that the central bank could still ease its policy stance.

"Against the conditions that we see prevailing over a meaningful horizon, our guidance includes an easing bias," Praet wrote in the paper, dated August 6.

"This conveys the notion that we have not reached the lower bound on our key interest rates," he added. "Further cuts in policy rates remain an option for the ECB if the outlook on price stability so warrants."

As holder of the ECB's economic portfolio, Praet's views carry weight because he makes a presentation at the beginning of Governing Council meetings that forms the basis of the policy discussion.

The ECB kept interest rates unchanged at a record low of 0.5 percent at its policy meeting last Thursday and confirmed they will remain there for some time to come and could fall further.

The apparent absence of a discussion about cutting rates last Thursday contrasted with the previous monthly meeting, when Draghi said the Council had an "extensive discussion" about a cut before deciding to hold.

Despite promising economic data from the euro zone, the ECB policy options are complicated by market responses to the U.S. Federal Reserve's plans to slow its stimulus program.

The ECB reacted in July to market turmoil sparked by the Fed's exit plan by breaking with precedent and offering forward guidance on the future path of its interest rates.

"The ECB's forward guidance has contributed to more clarity over our assessment of the outlook and our reaction function," Praet said. "Our forward guidance has contributed to more stable money market conditions and has helped to anchor market expectations more firmly."

"It also ensures that our monetary policy stance is not excessively vulnerable to shocks that are disconnected from the underlying economic and monetary conditions in the euro area," Praet said.

(Writing by Paul Carrel; Editing by Catherine Evans)