Dutch Central Bank president Klaas Knot voiced out his concerns on Sunday during a Dutch current affairs program. He said that the European Central Bank should be clear on how it will end its asset purchases as soon as possible. More specifically, after the current bond buying programs ends in September.
“There is no reason whatsoever to continue the programme,” said Knot. “I feel that we need to be clear about this.”
The ECB announced that it will be keeping its bonds purchases program until the end of September. It has kept the option to continue buying bonds after the date open.
Mario Draghi, ECB president, has not yet made the decision to commit to an end date of the asset purchases as of now. Knot then pointed out that keeping all options open might help keep the value of euro in check.
“That’s why we don’t commit to communicating now that it has to be done after September,” Knot stated. “But I think that’s where we’re going and that this sentiment is shared within the governing council.” Knot is the Netherland’s member of the ECB governing council.
According to him, ending the asset purchases could help turn the focus on possibly increasing interest rate in 2019. He then added that interest rate hikes will probably be slow and gradual during the coming years.
“Interest is mainly low because there are more people that want to save than that want to invest. This will change as the economy grows, but that will take time.”
ECB Will Stop Cash Pump Once Sure About Inflation
ECB will only stop pumping cash into the eurozone economy once inflation is secured.
Chief economist in ECB, Peter Praet said on Monday that ECB wants to first ensure that inflation will head towards its target even with no additional help.
According to Praet, the ECB will first need to be confident in the trend of inflation before making any decision. The target for inflation is set at almost 2 percent and that a withdrawal of stimulus can be endured.
“Once the Governing Council judges that the three criteria for sustained adjustment have been met, net asset purchases will expire, in line with our guidance,” Praet said.
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