ECB Tapering Decision May Take Until October

  • People familiar with the debate say September may be too soon
  • President Draghi says bond-buying to be discussed in the fall

UniCredit's Nielsen Expects January 2018 ECB Taper

The European Central Bank may not make a decision on the future of its bond-buying program until October, euro-area officials familiar with the matter said.

While Governing Council members expect to start a tapering discussion at their next policy meeting on Sept. 7, they see reason to doubt they’ll be able to reach a conclusion then, the people said, asking not to be identified because the deliberations are private. An ECB spokesman declined to comment.

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Officials cited the wide array of issues they’ll need to consider -- including the pace of quantitative easing, the wording of forward guidance and fresh economic projections -- as reasons the session might not be decisive. Policy meetings are also scheduled for Oct. 26 and Dec. 14.

After the Governing Council met in Frankfurt on Thursday, ECB President Mario Draghi told reporters that policy makers unanimously agreed to put off a formal debate until the fall, but that they opted not to set a precise date for talks. Economists surveyed by Bloomberg before the meeting had predicted the central bank would use the September gathering to signal a reduction in the monthly pace of QE.

The institution’s staff is already studying various options for how bond-buying might eventually be wound down, according to the people. Still, phasing out the program may not require much preparatory work, one of the people said. Draghi said the Eurosystem’s technical committees, comprising representatives from the ECB and the region’s national central banks, haven’t been formally asked to assess scenarios.

Go Slow

Policy makers are currently committed to spending 60 billion euros ($70 billion) a month on debt until at least December, and have repeatedly said any winding down must be gradual. Even so, officials differ in their views on what that means for the precise timing and pace of any withdrawal of stimulus.

The stepping stone to a shift in policy was laid down last month when the Governing Council upgraded its assessment of the risks to the economic outlook to “broadly balanced” from tilted to the downside. It also scrapped its expectation that interest rates might be cut again. Draghi reiterated that assessment on Thursday, while stressing the need for caution because of subdued price pressures.

“The incoming information confirms a continued strengthening of the economic expansion in the euro area, which has been broadening across sectors and regions,” he said. “We said: are we there? And the answer was: no, we aren’t there yet.”

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