ECB’s Centeno: Guided by Data, ‘Final Decision’ by ECB on When to End Asset Purchases Still Open

21 March 2022

By David Barwick – FRANKFURT (Econostream) – The European Central Bank will be guided by data in its decision-making and must thus make a ‘final decision’ yet about when net asset purchases should come to an end, Governing Council member Mario Centeno said Wednesday.

In an interview with Portuguese online newspaper Observador, Centeno, who heads Banco de Portugal, said that ‘putting monetary policy in a more neutral position, less accommodative’ was ‘the dominant dimension and the one that I consider most important in interpreting’ the Governing Council’s decision earlier this month.

At the same time, the invasion by Russia of Ukraine, ‘a new and very important fact that deserves our attention’, means that ‘the decision has to be read with that additional caution’, he said.

The ECB will act as the data indicate is needed, he said, meaning ‘the final decision’ regarding net asset purchases ‘is open’.

Centeno reminded that the pandemic emergency purchase programme (PEPP) remained available to counter any fragmentation even beyond the end of net purchases this month. ‘…the reinvestments are going to be done with enough flexibility to allow purchases that had originally been made in one jurisdiction to be directed to other jurisdictions if the market signals that there is such a need’, and without regard to the capital key, he said.

The amounts involved were ‘very significant’, he assured.

ECB monetary policy would cease to be accommodative when there was no further need, he said. ‘That is a guarantee that I can give’, he added.

As to the possibility that such a need would no longer exist in Germany but would in Portugal, he cited Portuguese progress in reducing private debt relative to GDP and noted that ‘[e]ven when ECB interest rates are no longer in negative territory, the level of interest rate that households will face is much lower than the one we faced a few years ago.’

The impact on Eurozone and Portuguese economic growth of the Russian assault on its neighbour would be ‘fairly significant’, he said, though even in the absence of growth this year, the economy would still end the year well above last year’s level.