ECB member hints at scaling back stimulus, but not everyone’s convinced
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*** PEPP is currently set to last until March 2022 and total 1.85 trillion euros ($2.2 trillion).
*** The ECB could choose to end it before or after this estimated date.
*** The ECB estimated in June that real GDP will exceed its pre-crisis level from the first quarter of 2022 onwards.
European Central Bank member Jens Weidmann has said the massive coronavirus stimulus program should be scaled back “step-by-step,” but others are worried about a premature lifting of the measures.
It is the big question on the ECB’s table: when to lift the pandemic emergency purchase program — known as PEPP, which is currently set to last until March 2022 and total 1.85 trillion euros ($2.2 trillion). The ECB could choose to end it before or after this estimated date. Market players have wondered about the same question off the back of stronger economic data in the euro area.
However, the path of the pandemic is uncertain and, despite strong economic data in recent weeks, there are concerns that a premature lifting of the stimulus would undermine the economic recovery even further.
“When the pandemic is over and once, you know, the economic consequences of the pandemic start to fade away, well, PEPP will finalize – that was, you know, the initial target,” Luis de Guindos, vice-president of the ECB, told CNBC’s Annette Weisbach on Monday at the same conference.
De Guindos reiterated that the ECB’s governing council had not officially started talking about when to wind down stimulus.
“But my approach is very, very simple, I think we should try to avoid cliff-edge effects,” de Guindos said. “I think we should try to do it as smoothly as possible and always taking the consideration (of) the evolution of the economy and the evolution of inflation.”
To avoid this so-called “cliff-edge” situation, Weidmann called for the scaling back of pandemic-related stimulus “step-by-step.”
Reference: CNBC
Read More: https://www.cnbc.com/2021/06/
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