ECB’s Praet confirms June meeting pivotal for bond-buying program

Bloomberg

European Central Bank Chief Economist Peter Praet confirmed that next week’s policy meeting will be pivotal for reaching a decision on when to end the institution’s bond-buying program.
His comments reinforce the view that the ECB is close to settling the question of how long it will keep buying debt to support the euro-area economy. Bloomberg reported that policy makers are likely to use the June 14 gathering for their first formal discussion on winding down the program, and could make a public announcement on when that will happen.
“It’s clear that next week the Governing Council will have to make this assessment, the assessment on whether the progress so far has been sufficient to warrant a gradual unwinding of our net asset purchases,” Praet said in a speech in Berlin on Wednesday.
Bundesbank President Jens Weidmann said in a video address following the speech that market expectations for bond-buying to end this year are “plausible.” Dutch governor Klaas Knot said in The Hague that it would be “reasonable” to announce an end to asset purchases soon. The euro rose 0.3 percent to $1.1754 as of 11:09 a.m., gaining for a third day.
“We see a chance that the ECB will announce an end-date to quantitative easing at the June meeting,” said Frederik Ducrozet, an economist at Banque Pictet & Cie in Geneva. “Praet’s speech is providing us with a foretaste of the June statement, in my view, which should describe the ECB’s growing confidence over the inflation outlook and pave the way for a short tapering.”
The remarks are significant because Praet crafts the policy proposals for the Governing Council. He also said acknowledged “waning market expectations of sizable further expansions” of QE, and said they reflect an improvement in the inflation outlook. Bond purchases are currently intended to run at 30 billion euros ($35 billion) a month until at least September.

LEAP FORWARD
While some members of the council see next week as a real chance for policy change, according to euro-area officials familiar with the matter, it’s possible nothing will materialise. President Mario Draghi may use his press conference to signal an announcement will come in July, according to one of the people. An ECB spokesman declined to comment.
Praet said he wouldn’t prejudge the council’s conclusions. Even just having the conversation though would be a significant leap forward on the path to unwinding unconventional stimulus, after months of avoiding formally addressing the matter.