BRATISLAVA/TALLINN (Reuters) - European Central Bank policymakers are beginning to think of how to support the euro zone economy after their 2.55 trillion euro quantitative easing (QE) scheme comes to an end and as strong growth reduces the need for aggressive stimulus.
The ECB has pledged to continue buying bonds at least until September. But with economic growth in the euro zone on its best run in a decade and inflation comfortably above 1 percent, it is widely expected to wind down the programme thereafter.
Cementing such expectations, the central bank governors of Estonia, Slovakia and Germany all discussed on Tuesday the need to shift the debate from bond purchases to other tools such as interest rates.
“Discussions are more and more shifting from asset purchases to possible future use of interest rates to regulate the economy,” Slovakia’s representative on the ECB’s Governing Council, Jozef Makuch, said in Bratislava.
The ECB has kept its deposit rate below zero since 2014, effectively charging banks on their idle cash to spur them to lend more.
It has also pledged to keep rates at their present level “well past” the end of its net bond buying and reinvest the proceeds of debt that matures “for an extended period of time”.
This so-called “forward guidance” has been credited with capping medium-term borrowing costs for euro zone governments, companies and households and is one of the policy tools the ECB can use after QE ends.
“Moving to a communication which draws attention to the multi-faceted elements of monetary policy including interest rates is probably something that we should consider over the coming months,” Estonia’s central bank governor Ardo Hansson said in Tallinn.
In remarks published on Tuesday, the head of Germany’s Bundesbank, Jens Weidmann, reiterated his view that the ECB should have set a clear end date for QE and that its policy would remain easy even after that in view of the huge stock of bonds it already owns.
So far such voices have been given short shrift during the ECB’s policy deliberations, with sources telling Reuters that policymakers calling for a change in the message were outnumbered at last Thursday’s meeting.
Reporting by Tatiana Jancarikova and David Mardiste; Writing by Francesco Canepa in Frankfurt and Robert Muller in Prague; Editing by John Stonestreet and Hugh Lawson