ECB may announce QE wind down in September - Wall Street Journal

FRANKFURT (Reuters) - The European Central Bank is likely to signal in September that its bond-buying scheme will be gradually wound down next year and ECB chief Mario Draghi could give the next clue on the plans in late August, the Wall Street Journal said on Thursday.

The headquarters of the European Central Bank (ECB) are pictured in Frankfurt, Germany June 10, 2017. REUTERS/Ralph Orlowski

Financial markets overwhelmingly expect the ECB to decide in September on the future of its stimulus policy beyond the end of this year. Some investors expect an extension with a one-off reduction while others see a gradual but steady wind-down, known as tapering.

ECB President Mario Draghi opened the door last month to tweaks to the bank’s stimulus policy, arguing that growth is providing the 19-nation euro zone economy with support so the ECB could scale back stimulus to maintain the overall level of accommodation.

Central bank officials who spoke to Reuters recently have pointed to September or, at the latest, October as a likely time for a decision but stressed this depended on economic data and market conditions.

Draghi is scheduled to speak at the Federal Reserve’s Jackson Hole symposium just two weeks before the ECB’s Sept. 7 meeting. He will be returning to the conference for the first time in three years, when he laid the foundations for the ECB’s massive asset purchase programme.

“The direction and timing of the communication would make sense to us,” ABN Amro economist Nick Kounis said in a note.

“Indeed, our base case is that the ECB will announce a tapering of its asset purchases from January 2018 onwards at the September meeting. At the same time, we think the ECB will try to sweeten the pill by making tapering slow and signalling that rate hikes are a long way off.”

In stark contrast with the Wall Street Journal report, Latvian central bank chief Ilmars Rimsevics, considered a moderate hawk on the Governing Council, argued that asset buys may go on for years to come, given recent inflation forecast cuts.

“This (projection cut) shows that the medium-term inflation target of 2 percent is not met, which means that this programme could continue for at least a couple of years,” Rimsevics told Latvian public radio on Thursday.

Bond yields moved slightly higher on the Journal report but the euro was little changed.

The ECB confirmed that Draghi will speak at Jackson Hole but declined to comment on the rest of the Journal story.

Reporting by Francesco Canepa; editing by Mark Heinrich