ECB’s bond purchases may end after September

Bloomberg

The European Central Bank (ECB) should adjust its policy guidance before the summer and shouldn’t have any problems ending net asset purchases in one swoop after September, Governing Council member Ardo Hansson said.
While the Estonian policy maker judged the ECB’s current stance as broadly appropriate, he argued in an interview with German newspaper Boersen-Zeitung that there was a “need for action in our communication.”
“There are certainly good reasons to reduce the importance of the net purchases in our communication soon — also with a view to a potential end to these purchases,” he said. If growth and inflation continue to evolve broadly in line with the ECB’s latest projection, it would “certainly be conceivable and also appropriate to end the purchases after September,” he said.
“The last step to zero is not a big deal anymore,” Hansson said. “You do not have to do a lot of fine-tuning. I think we can go to zero in one step without any problems.”
The euro extended gains after the comments were published, touching $1.2293, and traded 0.5 percent stronger on the day at 5:29 p.m. in Frankfurt. The yield on 10-year German bonds rose one basis point to 0.59 percent.
Hansson’s comments come after an account of the Governing Council’s December meeting showed policy makers were open to tweaking their policy guidance soon to align it with a strengthening economy, spurring a rise in the euro as traders bet bond-buying will end in September.
The appreciation of the single currency “is not a threat to the inflation outlook” up to now, and one “shouldn’t overdramatize” it, Hansson said. Expressing concern that the ECB might fall “behind the curve” in unwinding monetary stimulus as the 19-nation economy recovers, he argued in favor of a “timely, gradual exit.”
“I do not like if people argue for erring on the side of caution,” he said. “That sounds natural and rational, but it is ultimately a form of imprudence.”