ECB should decide 'now' when to end asset buying, Lautenschläger says
Eurozone inflation is on track to meet the European Central Bank's target and it is time to take a decision "now" when to scale back its programme of asset purchases, known as quantitative easing (QE), ECB executive board member Sabine Lautenschläger said.
The ECB is using QE to bring eurozone inflation to below, but close to 2%. Its rate-setting Governing Council decided on September 7 that the asset purchases, now running at €60 billion a month, will continue until the end of December, "or beyond, if necessary" and in any case until there is a "sustained adjustment" in inflation.
"There's no doubt that monetary policy will return to normal. The question is when," Lautenschläger said at a forum in the Estonian capital Tallinn on Friday. "The conditions are all in place for inflation to reach a stable trend towards our goal."
Consumer prices across the 19-nation eurozone increased 1.5% in August, quickening from 1.3% in July. The ECB's asset purchases from banks brings money into the financial system and takes interest rates down.
Consumers and businesses can thereby borrow more at lower costs, and their spending and investments should increase. That, according to the ECB, should take inflation nearer to 2%.
Lautenschläger cited economic growth and job creation across the 19 countries sharing the euro currency as factors taking consumer prices higher. The pace has been slower than expected, she said, pointing to oil and commodity prices as well as 'slack' in the labour market.
ECB President Mario Draghi said on September 7 that any decisions about phasing out QE are "complex" and "many" and carry risks.
"Probably the bulk of these decisions will be taken in October," Draghi said.
Lautenschläger said another challenge is how the ECB should wind down its bond purchases.
"I am aware that this requires us to communicate very carefully," she said. "On the one hand, we must help markets to get an idea of what the exit will look like. On the other hand, we mustn't confuse them with vague or ambiguous ideas. It's a delicate balance we have to strike. And in my view we need to find this balance now."
(Alistair Holloway, firstname.lastname@example.org, +352 49 93 739)