ECB’s Kazimir: Cliff Effects Don’t Automatically Justify Boosting Standard Asset Purchase Programmes

28 September 2021

By David Barwick – FRANKFURT (Econostream) – The desire to avoid cliff effects when the European Central Bank end emergency purchases of debt does not imply an increase in pre-existing bond purchase programmes, ECB Governing Council member Peter Kazimir said Tuesday.

In an interview with Bloomberg, Kazimir, who heads the National Bank of Slovakia, said, ‘Concerns about the cliff effect cannot automatically mean demands for increasing the standard programs.’

The ECB having already showed itself to be ‘extremely flexible’ in its policy responses, ‘there is no automatic formula’, he was quoted as saying. ‘We’ll be deciding according to conditions at the given time.’

The pandemic emergency purchase programme (PEPP) has been ‘functioning very well and naturally it is now in the final stage of its life cycle’, he said. ‘It’s a special tool designed for a special situation, and it will be phased out when it’s not needed anymore. The market seems to understand that this tool will be terminated with the end of the pandemic.’

Kazimir, according to the news agency, considered inflation risks to be on the upside overall. ‘If inflation remains elevated next year because of supply bottlenecks, my concern is that it could spill into wage negotiations for the following year as well’, he said, adding however that ‘we are not seeing this happening in key countries so far.’