ECB’s de Guindos Should Handle Transition from PEPP as Smoothly as Possible

28 June 2021

By David Barwick – FRANKFURT (Econostream) – The transition from the European Central Bank’s pandemic emergency purchase programme (PEPP) should be as smooth as possible, ECB Vice President Luis de Guindos said Monday.

During a Q&A following his speech at the Frankfurt Euro Finance Summit, de Guindos called the PEPP ‘an exceptional program in order to address an exceptional problem’ and suggested that ‘once the consequences of the pandemic start to fade away’, the PEPP would be retired.

‘Having said that, we have not discussed anything with respect to the transition’, he continued. ‘But my approach is very, very simple. I think that we should try to avoid cliff-edge effects … we should try to do it as smoothly as possible, and always taking into account’ the state of the economy and inflation.

De Guindos referred to the ‘transition from PEPP to PSPP’, a reference to the ECB’s public sector purchase programme.

The US and the euro area are at different points of the business cycle, he said.

Currently high inflation is a ‘consequence of temporary factors’, he said. ‘We have to bear in mind that 2020 was a very strange year … sometimes to use 2020 as a base of reference’ can lead to ‘misunderstandings, both in terms of inflation and growth.’

‘I think the main reference should be 2019’, he said.