ECB governors weigh delaying call on future bond purchases amid murky outlook

A growing number of governors of the European Central Bank is evaluating delaying part of a decision on the entity’s stimulus plans, as the outlook has been clouded by a new coronavirus variant and mounting pressures on prices, several sources said.

The Governing Council of the ECB will meet on December 16 to decide whether to end its emergency bond purchases in March and how much debt to buy after that date in an effort to stabilize the inflation in the euro zone by 2 percent.

On the occasion of the seminar that brings together the monetary authorities this Wednesday, three sources in the Governing Council of the ECB or close to it said that there was an agreement to end the Pandemic Emergency Purchasing Program (PEPP) in March, as repeatedly noted by the President Christine Lagarde.

However, some governors would be in favor of leaving the decision on the bond purchases after March for the next policy meeting on February 3, when more will be learned about the impact of the Omicron variant and the inflation outlookadded the sources.

They are likely to face some resistance from the ECB’s Executive Board, which gave guidance on a decision in December and may want to avoid inconvenience to bond investors seeking reassurance.

Faced with market pressures, another possibility is to design plans in December only during the first months after the end of the PEPP, which would allow authorities to review their decision in early 2022, the sources added. An ECB spokesman declined to comment.

Monetary authorities became less certain about the outlook over the past week, as the emergence of Omicron brought back the travel restrictions and shook the financial markets.

At the same time, inflation hit a record 4.9% on Tuesday and showed signs of spreading to more parts of the economy, suggesting that prices will stay higher for longer and possibly boost wage inflation.

The doubts were probably aggravated on Tuesday, when the president of the Federal Reserve, Jerome Powell, abandoned his claim that the recent rise in inflation in the United States is transitory and indicated that the institution could withdraw its support faster than planned.

So far, the ECB has held to its line that inflation was driven primarily by temporary factors such as rising energy prices, supply bottlenecks, and the base effects of last year’s decline. .