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As euro zone grows, three ECB rate setters mull stimulus cut

Reuters  |  LJUBLJANA/FRANKFURT 

By Francesco Canepa and Hans Seidenstuecker

LJUBLJANA/FRANKFURT (Reuters) - With the euro zone's economy finally growing, the time for the European Central to reduce its monetary stimulus may be nearing, speeches by three policymakers suggested on Thursday.

After buying more than 2 trillion euros ($2.38 trillion)worth of bonds since 2015, the is expected to announce next month it will slow the pace of its purchases, since economic growth is accelerating and inflation is stable, albeit sluggish.

One of the most vocal critic of the bond buys, Bundesbank head Jens Weidmann, said the situation called for "easing up on the accelerator" of monetary stimulus as the threat of a sustained fall in prices was now gone.

"We're not talking about a complete stop in monetary policy, but rather of easing up on the accelerator," Germany's central governor said in at an event in Frankfurt.

"The Governing Council must be careful not to miss the right time for normalising "

Speaking earlier in Ljubljana, Belgian governor Jan Smets, who also sits on the ECB's Governor Council, said inflation seemed to have bottomed out.

His Slovenian colleague Bostjan also highlighted the euro zone's positive economic performance and said a decision on the future of stimulus was now inevitable.

But he added policymakers were waiting for more economic data to confirm that inflation was indeed heading towards its mandated target of almost 2 percent.

"We need more data and more confirmation that what we are doing is in line with fulfilling our mandate," the Slovenian representative on the ECB' Governing Council said.

Their comments add to similar remarks by six other policymakers earlier in the week, showing consensus was building around a reduction in stimulus.

Indeed, sources have told that policymakers agreed last week that their next move would be cutting the amount of bonds the buys each month although the details of any decision had yet to be worked out.

Euro zone inflation is now reliably above 1 percent, and President Mario Draghi said he expected it to reach the ECB's target in 2020, after missing it since 2013.

But Draghi also emphasised uncertainty stemming from the euro's rally against the dollar and other major currencies, which could affect inflation by making imports cheaper and exports dearer.

played down this threat, arguing that the strong euro was "a reflection of robustness of growth" in the euro zone.

($1 = 0.8403 euros)

(Additional reporting by Marja Novak and Balazs Koranyi; Editing by Larry King)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, September 14 2017. 22:09 IST
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