ECB’s Müller: Time to Clearly Reduce ECB’s Support for Economy

4 February 2022

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Madis Müller on Friday said that it was apparent that the moment had come to reduce ECB policy support for the economy.

In a contribution to Estonian daily paper Postimees, Müller, who heads the Estonian central bank, said that the unexpected persistence of high inflation rates was the ideal context for Governing Council deliberations.

‘In this context, it is particularly important to emphasize that the European Central Bank is ready to adjust its plans for the near future if necessary’, he said. ‘For example, in the Governing Council of the European Central Bank, we may review how quickly we complete bond purchases, which should have lasted at least until the end of this year. All indications are that it is time to move in a clear direction to reduce the European Central Bank's support for economic recovery.’

Müller called it ‘important’ that other central banks had ‘already taken a much clearer stance on tightening interest rate policies’, though he conceded that ‘the economic situation and the upward pressure on prices in America, for example, are different from what we see in the euro area.’

In this respect, he observed that core inflation rates were much higher in the US than in the Eurozone. ‘It is therefore understandable that the European Central Bank has somewhat more time to tighten monetary policy’, he said. ‘But as recent price statistics show, this time may not be too long.’

The chief drag on growth were supply constraints, but companies were optimistic about the next quarters, he said. Despite record-low euro area unemployment, wages were not behaving dynamically in the bigger member economies, he noted.

‘And, of course, high energy prices are a concern’, he said. ‘If they persist for a long time, they will take away most of people's income than usual. As a result, people and businesses will have less room to spend the rest - other goods and services will be bought less, and growth in the euro area could slow down.’