ECB Insight: APP Could End Any Month in 3Q, Potentially Even in 2Q

11 March 2022

By David Barwick – FRANKFURT (Econostream) – The European Central Bank’s asset purchase programme could potentially wind up ending in the second quarter, Econostream understands.

The April monetary policy meeting of the Governing Council is too soon to expect further decisions and these will come at the June meeting, an insider told Econostream.

‘What’s important in April is the discussion of inflation expectations, and this in a way paves the way to future policy decisions’, he said. ‘Do we wind up the APP in the third quarter? And when in the third quarter? This is an important question that no one asked. July, August or September – it’s open.’

Yesterday’s monetary policy statement, he reminded, said: ‘If the incoming data support the expectation that the medium-term inflation outlook will not weaken even after the end of our net asset purchases, the Governing Council will conclude net purchases under the APP in the third quarter.’

Not only is the precise month an open question, but it follows that the quarter is as well, he reasoned. ‘There is no amount of APP decided for the third quarter’, he said. ‘It may very well be that APP ends in quarter two’ if, for example, purchase volumes were zero from July.

‘In huge uncertainty we need to be as clear as possible’, he said. ‘So if we say that we are going to end the APP in 3Q, we would need to say something to the markets about the purchase volumes in 3Q. However, the decision was that we would decide about this later on. It’s okay with me, but it leaves room to end the APP. I think it’s not sufficiently realised. And yet, it’s also optionality.’