ECB could stop buying bonds in September 2022, according to a member of the Board

The European Central Bank could stop buying bonds from next September if inflation returns sustainably to the official target, said Robert Holzmann, a member of the Governing Council.

Introduced in 2015, the bank’s asset purchase program, known as APP for short, was designed to bring consumer price growth back to 2%, according to Holzmann, who heads Austria’s central bank. and is considered one of the most hawkish policymakers in the eurozone.

“Then, the elimination of the condition and, therefore, the end of the program could happen, depending on the evolution of inflation, in September or at the end of the year”He said at an event in London on Wednesday.

Italian bonds were little changed at the open Thursday after Holzmann spoke. Its timing would suggest the withdrawal of the stimulus much earlier than anticipated by ECB watchers, and economists surveyed by Bloomberg predict that the bond buying tool will remain operational until at least the end of 2023.

ECB officials are five weeks away from a meeting to chart their post-pandemic political path. Although the president of the institution, Christine Lagarde, has indicated that the purchases of pandemic assets will end as planned in March, there is no consensus on what will happen to the bank’s conventional bond purchase plan, which currently costs 20,000 million of euros (US $ 23.1 billion) per month.

Inflation in the euro area, moderate in the years after the global financial crisis, doubles the official medium-term goal.

Inflation bet

Holzmann, who expects price growth to remain above 2% through 2022, said he opposes any change in the conventional bond purchase plan. He is also against another round of longer-term refinancing operations aimed at luring banks into lending to the real economy.

“The data analyzes that we have show that the effects of the additional loans were very low ”, said. “I don’t see any reason for this to keep working, the economic effect is low.”

The focus is now on the path of inflation. Goldman Sachs expects it to be half a percentage point above pre-pandemic levels. That means that the natural rate of interest, at which economic growth is neither stimulated nor constrained, could receive a similar boost in relation to the aftermath of the 2008 crash.

“I wouldn’t bet much that inflation will be below 2% by the end of 2022″ Said Holzmann. However, he added that models suggest that the rate will fall below that level in 2023 or 2024.

Inflation is likely to be 2.2% in 2022, according to new forecasts from the European Commission to be released later on Thursday. The ECB will release its own projections at its meeting next month.

While central banks in countries like Poland and the Czech Republic have surprised with steeper-than-expected rate hikes recently, the ECB has insisted that borrowing costs will not rise anytime soon.

Money markets are betting that the ECB will increase its deposit rate by 10 basis points to -0.4% in September 2022. At the end of October, it was preparing for a 20 basis point adjustment in November 2022.