ECB’s Kazaks: If Financing Conditions Stay Favourable, We Could Decide in June to Buy Less

10 May 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Martins Kazaks said Friday that the ECB might decide in June to slow its asset purchase pace.

In an interview with Bloomberg, Kazaks, who heads Latvijas Banka, was quoted as saying that ‘[i]f financial conditions remain favourable, in June we can decide to buy less’ and that ‘[f]lexibility is at the very core of PEPP.’

However, the agency reported, Kazaks said the economy would still require substantial support from monetary policy until well after the pandemic ended.

‘Will we react to all interest-rate increases? No, because interest rates at some point will need to rise’, he said. ‘We look at a wide set of variables, and their importance can change with time because of many factors, one of those being the stage of the recovery.’

Kazaks was reported to have said that there was no apparent reason to think the ECB’s pandemic emergency purchase programme (PEPP) would be extended past its current end date of March 2022, and that the ECB might not need to exhaust the entire envelope.

‘The size of the package is not an absolute truth’, he said. ‘If the economy performs nicely, it’s quite likely that we will not need to spend everything.’

However, given ‘still quite high’ uncertainty, it was ‘premature’ to discuss an exit from PEPP.

‘If the inflation outlook remains like the current forecast when PEPP ends, I think we would certainly discuss increasing APP [the asset purchase programme]’, he said. ‘Monetary policy will remain very accommodative. If necessary we can also devise new instruments.’