FRANKFURT (Reuters) - The European Central Bank will debate on Thursday whether to end a 2.55 trillion euro ($3.01 trillion) bond purchase scheme this year as inflation is on the rise and growth has lasted five years.
The following are key comments from Governing Council makers in the weeks leading up to the meeting.
“Next week, the Governing Council will have to assess whether progress so far has been sufficient to warrant a gradual unwinding of our net purchases.
“Once the Governing Council judges that the three (inflation) criteria have been met, net asset purchases will expire.
“Our forward guidance on policy rates will then have to be further specified and calibrated as appropriate for inflation to remain on the sustained adjustment path to levels below, but close to, 2 percent over the medium term.
“Signals showing the convergence of inflation towards our aim have been improving, and both the underlying strength in the euro area economy and the fact that such strength is increasingly affecting wage formation supports our confidence that inflation will reach a level of below, but close to, 2 percent over the medium term. As for our third criterion, resilience, waning market expectations of sizeable further expansions of our program have been accompanied by inflation expectations that are increasingly consistent with our aim.”
FRANCOIS VILLEROY DE GALHAU, GOVERNOR OF THE BANK OF FRANCE, MAY 14
“As far as the first rate hike is concerned, we could give additional guidance on its timing – ‘well past’ meaning at least some quarters but not years – and its contingency on the inflation outlook. Beyond that, the updated formulation of our communication will have to continue providing guidance on future interest rate movements over a relevant horizon, in order to avoid unintended volatility of the yield curve, especially during the transition period.
BENOIT COEURE, MEMBER OF THE ECB’S EXECUTIVE BOARD, MAY 23
“At the end of last year I said that I didn’t expect that our asset purchase program would need to be extended again. I see no reason to change my view.”
SABINE LAUTENSCHLAEGER, MEMBER OF THE ECB’S EXECUTIVE BOARD, MAY 29
“June might be the month to decide once and for all to gradually end net asset purchases by the end of this year.
“So we are seeing that the pace of growth has become more moderate, but we are not seeing a turning point. We remain confident in the strength of the economy.
“Even when we end net purchases, monetary policy will still be extraordinarily accommodative. And, at the same time, other tools will remain in place.”
“I and most market experts think it makes sense to herald the end of the bond purchasing program quickly.”
“For some time now, financial market participants have been expecting that the asset purchases will end before 2018 is out.
“As things stand, I find these market expectations plausible.”
EWALD NOWOTNY, GOVERNOR OF AUSTRIA’S CENTRAL BANK, MAY 17
“Some ECB governing council members including me think that we should not wait too long until we normalize monetary policy.”
Reporting by Balazs Koranyi; Editing by Kevin Liffey