ECONOMY

ECB has more tricks up its sleeve than just PEPP

ecb-has-more-tricks-up-its-sleeve-than-just-pepp

The European Central Bank is likely to stop further bond purchases under its pandemic-era support scheme from early next year but will still have other purchasing programs in its toolkit, President Christine Lagarde was quoted as saying by a German daily.

The ECB backstop Pandemic Emergency Purchase Program (PEPP) has allowed the vulnerable bond markets of Italy, Spain, Portugal and Greece to borrow and spend freely during the coronavirus pandemic without being punished by investors.

“That doesn’t mean that PEPP will be totally ended because we have to replace the expiring bonds. And do not forget that we have other purchase programs in our toolkit.”

Her comments came as two ECB policymakers said the eurozone economy faced a fresh challenge from a rise in coronavirus cases and a new variant.

Lagarde also said the ECB will act on interest rates when necessary and when price rises reach 2% on a sustained basis but she expected inflation to fall from January.

“It’s eye-catching at the moment and is worrying a lot of people but we do not expect this rise in inflation to last,” Lagarde said.

“Next year it will calm down again. Already from January onwards, we expect the inflation rate to begin falling.” [Reuters]