ECB's Vasiliauskas Says Wait for December to Discuss QE Boost

  • Lithuanian central-bank head says euro-area data is positive
  • ECB will hold monetary-policy meetings on Oct. 22 and Dec. 3

European Central Bank Governing Council member Vitas Vasiliauskas said policy makers should watch for new macroeconomic forecasts at the end of this year before even discussing whether to expand stimulus.

“We have to wait until December -- I don’t think that in October we will be
ready,” Vasiliauskas, who heads the Bank of Lithuania, said in an interview in London on Thursday. "It’s early to discuss anything in October."

With euro-area consumer prices barely rising and China’s slowdown casting doubts over global growth, speculation is mounting that the ECB will step up the quantitative-easing program it started in March. President Mario Draghi told European Union lawmakers on Wednesday that he won’t hesitate to act if the outlook worsens, though time is needed to gauge the risks.

While Vasiliauskas’s comments echo those of Draghi and colleagues on the Governing Council -- including remarks this week by Ewald Nowotny and Bostjan Jazbec-- he goes further in saying any detailed talks before December would be premature. The ECB has monetary-policy meetings scheduled for Oct. 22 and Dec. 3 and will release revised quarterly economic forecasts at the second of those.

Stimulus Working

The 42-year-old governor said that while the international environment is uncertain, the euro-area economy is showing stronger signals. A purchasing managers’ survey by Markit Economics published this week showed growth continuing and an index of business confidence in Germany, the region’s biggest economy, unexpectedly rose.

“We can see that the QE program is working through several channels,” Vasiliauskas said. “I don’t think that for the moment we should even discuss about something more than what we are doing now. We are only in the seventh month of the program.”

Europe’s biggest bond funds are queuing up to predict that the central bank will augment its stimulus efforts. Money managers from BlackRock Inc. and Pacific Investment Management Co. said Thursday that the ECB’s debt-purchase plan is likely to be expanded as the outlook for inflation deteriorates.

At its last policy meeting on Sept. 3, the central bank cut its growth and inflation forecasts and Draghi warned that further downward revisions were possible if a slump in commodity prices and a slowdown in emerging markets were to continue. Officials now predict inflation at 0.1 percent this year, 1.1 percent next year and 1.7 percent in 2017, compared with their medium-term goal of just under 2 percent. The rate was 0.2 percent in August.

QE Extension

Since March, the ECB has been buying 60 billion euros a month of sovereign and agency debt, covered bonds and asset-backed securities. Draghi told the European Parliament the program could be extended past its initial end-date of September 2016, increased in size, or broadened to include new asset classes.

Vasiliauskas also addressed the European Union’s migrant crisis.

Border closures “can negatively influence many freedoms on which Europe is based,” he said. “I pay the most attention to free movement of people which means free movement of labor, of capital. I see just the danger for the common market.”

Migrants offer an opportunity to address the challenges of Europe’s low birth rate and aging society, he said.

“We can expect a negative short-term effect, because logistically there are some problems, and member states need to make efforts and spend more,” he said. “But in the long term we should not miss a possibility to improve the labor market.”