ECB Is in No Rush on Pandemic Bond-Buying Pace, Villeroy Says

(Bloomberg) -- Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

The European Central Bank is in no rush to adjust its pandemic bond-buying pace, and any talk of reducing support already in the third quarter is “purely speculative,” according to Governing Council member Francois Villeroy de Galhau.

Villeroy, who heads France’s central bank, joined ECB President Christine Lagarde in pushing back against expectations that a policy shift is imminent. Officials including Klaas Knot have suggested over the past weeks that the economy could be strong enough to cope with less stimulus as early as July. The next policy meeting is scheduled for June 10.

“We still have ample time to judge and decide, well beyond our June meeting,” Villeroy said in a speech at the Nordic Summit. “Let me be crystal-clear: any hypothesis of a reduction of purchases partly for the third quarter or the following quarters is purely speculative.”

The ECB decided in March to significantly increase the pace of its emergency purchases to maintain favorable financing conditions, and Lagarde said Friday it’s “far too early” to discuss longer-term plans for the program.

Villeroy said that the ECB can adjust other measures once the crisis tool expires to keep policy loose as long as necessary. Those changes could include tweaks to the deposit facility or to its older bond-buying plan.

“Based on our experience with the pandemic emergency purchase program, we could move toward some additional flexibilities, in terms of allocation and/or volume,” he said.

He also said that the -0.5% interest rate on the ECB’s deposit facility is “not a floor” and could be cut further if necessary by using the tiering system to limit the negative side effects for banks.

©2021 Bloomberg L.P.