The European Central Bank (ECB) has to end its quantitative easing (QE) as soon as possible, according to Dutch Central Bank President and ECB Governing Council member Klaas Knot, who said there is not a single reason anymore to continue with the program.
“The program has done what could realistically be expected of it,” Knot said on Sunday in an interview on the TV talk show Buitenhof.
The ECB is inching closer to unwinding unprecedented stimulus. At their December meeting, officials held out the prospect of a change in policy language early in the year and some governors have since expressed their favor for taking a first step in March.
While ECB President Mario Draghi on Thursday said that confidence in a sustained pickup in inflation has increased, patience and persistence are still warranted as progress so far remains muted.
“The program is fixed until September,” Knot said, with Draghi’s reasoning being that the central bank does not have to commit yet to what will happen after that month. “We don’t have to communicate yet that it will be over after September, but I think that’s where we’re headed.”
He said there is enough proof to make that clear.
The ECB earlier stuck by its plan to continue buying 30 billion euros (US$37 billion) of assets each month until at least the end of September and has reiterated that interest rates would stay low well beyond that.
Inflation in the euro area probably slowed to 1.3 percent in January, according to a survey of economists before a report tomorrow. Data to be issued today are likely to show a 19th consecutive quarter of expansion at the end of 2017.
Knot said the lack of commitment to any communication by the ECB as to what might happen to the QE program beyond September could have a dampening effect on the euro.
A 6 percent surge in the euro since mid-December is threatening to become a thorn in the economy’s side if it curbs exports and damps prices. The rally was fueled by US Secretary of the Treasury Steven Mnuchin’s remarks last week that appeared to welcome a weaker dollar.
Since then, policymakers including Draghi, ECB Executive Board member Benoit Coeure and Bank of France Governor Francois Villeroy de Galhau have politely reminded US officials of a global commitment to refrain from targeting exchange rates to gain a competitive advantage.
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