News

Inflation uncertainty means ECB’s options need to be kept fully open -Villeroy

© Reuters. FILE PHOTO: Bank of France Governor Francois Villeroy de Galhau delivers a speech during the annual meeting of Small and Medium-sized Enterprises leaders at the Bank of France in Paris, France, October 22, 2021. REUTERS/Sarah Meyssonnier

PARIS (Reuters) -Increased uncertainty about the inflation outlook means the European Central Bank needs to keep its options fully open, especially on future interest rate hikes, ECB policymaker Francois Villeroy de Galhau said on Tuesday.

In the face of growing inflation risks, the ECB has opened the door to an interest rate hike later this year and flagged plans to decide at a March 10 meeting how quickly its long-running bond purchases are wound down.

In a speech to the London School of Economics, Villeroy said it would be useful to have a transition between the end of exceptional pandemic-era bond purchases in March and the end of its more traditional Asset Purchase Programme, which he said could end in the third quarter.

Villeroy, who heads the French central bank, also said that the link between the end of asset purchases and rate hikes could be softened by dropping the suggestion in the ECB’s forward guidance that a hike would come “shortly” afterwards.

“We could give ourselves more time and consider the latest inflation outlook before deciding about the calendar of rate hikes – a decision that anyway we don’t need to make before our June meeting,” Villeroy said.

“Any speculation about this calendar of future lift-off is at this stage premature,” he added.

Villeroy also pushed back against market speculation that the ECB could pause hikes or slow them after rates return to positive territory, saying that there was “no pre-set course” although that could be a possibility.

In the risk of an “unwarranted” blow-out in bond spreads between euro zone countries, he said the ECB could reactivate its pandemic-era bond purchases if needed.

Inflation uncertainty means ECB’s options need to be kept fully open -Villeroy

Disclaimer:Fusion Mediawould like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

What's your reaction?

Excited
0
Happy
0
In Love
0
Not Sure
0
Silly
0

You may also like

Leave a reply

Your email address will not be published.

More in:News