ECB chief reiterates that the Governing Council intends to take the ‘bulk’ of its decisions this month
FRANKFURT • With the European Central Bank’s (ECB) next policy update less than two weeks away, the institution’s chief is expressing both confidence and patience about achieving its inflation goal.
“We are confident that as the conditions will continue to improve, the inflation rate will gradually converge in a self-sustained manner, as we’ve defined many times, and in a durable way to our objective,” ECB president Mario Draghi (picture) told reporters in Washington on Saturday. “But together with our confidence we should also be patient because it’s going to take time.”
Draghi’s assessment comes as policymakers prepare for a meeting on Oct 26 that is widely expected to set out the plan for their bond-buying programme past the end of this year. While the ECB currently purchases €60 billion (RM299.96 billion) of assets per month, officials are debating how they may be able to scale back some of that stimulus to adapt to an improving economy.
The ECB president reiterated on the sidelines of the annual meetings of the International Monetary Fund that the Governing Council intends to take the “bulk” of its decisions this month.
One idea that has been publicly floated by the institution’s chief economist, Peter Praet, is a bigger reduction in monthly buying in exchange for a longer duration of the programme. Draghi told reporters that Praet “had said it very well”.
Subdued nominal wage growth is currently the main factor holding down underlying price pressures, which still don’t show “a convincing sign of moving upward”, Draghi said.
“Therefore, we’ve got to be persistent with our monetary policy,” he said. “We also have to be prudent” and will maintain “an extraordinary degree of monetary accommodation.”
ECB officials are considering cutting their monthly bond buying by at least half starting in January and keeping their programme active for at least nine months, according to officials familiar with the debate.
Governing Council member Ignazio Visco said at a conference in Washington that “I would prefer not to have specific dates and periods” when it comes to phasing out quantitative easing because “we need the flexibility that is in the programme”.
He argued that any recalibration of policy instruments should be data-dependent, particularly when it comes to inflation.
“We have to make sure we’re on a path that is sustained,” Visco said. “And we have to be careful that if we get a decision, this decision shouldn’t be reversed.” — Bloomberg