The European Central Bank should retain the flexibility of the emergency stimulus plan

FRANKFURT (Reuters)-European Central Bank board member Fabio Panetta said on Monday that the European Central Bank must not reduce stimulus measures prematurely and should maintain the extraordinary flexibility of its emergency bond purchase program after the current crisis. Sex.

In order to ensure the recovery of the Eurozone economy during a deep recession, the European Central Bank last year agreed to provide special flexibility for its 1.85 trillion euro pandemic emergency purchase plan. The plan may end as early as March next year, which increases the risk of the European Central Bank’s retreat in certain markets.

More traditional tools, such as asset purchase programs, make it difficult for the European Central Bank to concentrate bond purchases in certain markets or flexibly change the scale of its intervention.

Panetta said: “When differences in financing conditions across countries constitute continuing obstacles to the communication mechanism, the pandemic emergency purchase plan shows the benefits of flexible monetary policy.”

Panetta said at a conference: “We should strive to retain the’unconventional flexibility’ that will be useful to us during the pandemic.”

These comments may bring Panetta into conflict with influential policymakers such as Isabel Schnabel, a member of the European Central Bank’s Executive Committee, and the governor of the Bundesbank, Jens Weidmann, who both oppose retaining all the flexibility of PEPP after the current crisis. Sex.

Panetta also warned against prematurely reducing the support of the European Central Bank, saying that an early withdrawal would excessively push up borrowing costs and eventually force the European Central Bank to increase purchases later.

“Experience shows that reducing the speed of asset purchases prematurely will result in tightening of financing conditions, after which the speed of purchases will increase,” he said.