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ECB should keep policy options open regardless of Fed

Reuters  |  NUSA DUA, Indonesia 

NUSA DUA, (Reuters) - The should keep its policy options open and not let itself be influenced by the Federal Reserve, ECB policymaker said on Sunday.

Encouraged by a recovery in euro zone inflation, the ECB expects to stop adding to its 2.6 trillion euro ($3.0 trillion) pile of bonds at the end of this year and has guided the market to expect a rate hike some time in late 2019.

Villeroy said the ECB would soon decide how to reinvest the proceeds of the bonds that expire next year but should not yet commit beyond that point.

"We should keep our options open about the timing of our reinvestment in the following years," he told a conference on the sidelines of the International Monetary Fund's annual meeting in the Indonesian resort town of

The French central added that rate-setters should wait a little longer to clarify their guidance on interest rates, which currently just says they will stay at their current, rock-bottom level "at least through the summer of 2019".

"As we approach the summer of 2019, the balance will shift in favour of detailing our forward guidance," Villeroy said.

Six rate hikes by the Fed in 1-1/2 years have sent the U.S. dollar rallying against the currencies of fragile emerging economies such as and Turkey, forcing their to also increase borrowing costs to arrest the slide.

The euro zone has been relatively insulated and Villeroy said the ECB should proceed at its own pace.

"I think the euro area can determine its own course," he said.

($1 = 0.8650 euros)

(Reporting by Francesco Canepa; Editing by Clarence Fernandez and Richard Pullin)

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

First Published: Sun, October 14 2018. 09:15 IST