ECB’s Kazāks: Omicron No Reason Yet to Defer PEPP’s End Beyond Next March
8 December 2021
By David Barwick – FRANKFURT (Econostream) – The emergence of the Omicron variant of the coronavirus is not yet a reason to defer beyond next March the end of the European Central Bank’s pandemic emergency purchase programme (PEPP), according to ECB Governing Council member Mārtiņš Kazāks on Wednesday.
In an interview with Bloomberg, Kazāks, who is Governor of Latvijas Banka, said, ‘At the current moment, we don’t know how the Omicron variant will develop. Unless it spills over into significant and large negative revisions to the outlook for growth, I don’t see that March -- which the market has been expecting for some time and which we’ve been communicating in the past -- should be changed.’
‘If in February we see that it’s painful then of course we can change our views and that’s the issue of flexibility’, he was quoted as saying. ‘In my view, it’s possible both to restart PEPP or increase the envelope if it turns out to be necessary.’
Kazāks assessed the path of inflation as ‘hump-shaped’ and predicted a slowdown next year despite risks being on the upside overall.
‘To exactly what level will it land in 2023-24, of course, there’s lots of uncertainty’, he said. ‘[M]y baseline remains that it slides to below 2%.’
He urged avoiding too-long commitments for the time being. ‘At the moment we simply know too little about omicron’, he said. ‘I see it important to remain data-driven and make our decisions step by step. So react to the data, rather than preempt decisions when uncertainty is way too high.’