FT Cites ECB Council Members as Suggesting Less Inclination to Maintain Asset Purchases

7 December 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank policymakers are less sure than ever about the speed with which inflation will recede and are thus reconsidering their willingness to continue providing monetary accommodation, the Financial Times reported on Tuesday.

The latest increase in euro area inflation, the appearance of the Omicron variant of the coronavirus and the US Federal Reserve’s intention to step up its tapering all argue for a less dovish outcome of next week’s Governing Council meeting, the FT said, citing unnamed Council members.

‘On Omicron, it’s clear that it will keep inflation up for longer because the disruption of supply chains will last longer’, the paper quoted one Council member as saying. ‘The pandemic has changed the structure of the economy, with more homeworking, a higher carbon price and a shift away from globalisation. Over the medium-term, inflation could be higher than our target and then we would have to act.’

A second Council member, according to the paper, said he ‘would be very uncomfortable committing to anything beyond the end of the second quarter of next year. Markets are just going to have to live with that.’

A third policymaker reportedly suggested that the decision on future asset purchases could be delayed ‘depending on the pandemic and new data in the next two weeks’.

The newspaper said that two Council members said central bankers were increasingly of the opinion that from the point of view of stimulating inflation, boosting monthly asset purchases was of little use, with one saying, ‘There is no point expanding the asset purchase programme after March.’