ECB likely to change stimulus plan

Frankfurt:  The European Central Bank (ECB) is likely to decide on the next change in its stimulus settings in the fall, when it will continue the process of tweaking its measures to reflect the euro area’s upturn, according to Governing Council member Francois Villeroy de Galhau.
“What we have to do, and what we started to do, is to adapt the intensity of this accommodative monetary policy to the progress toward our inflation target and toward economic recovery,” he said in interview yesterday.
“In the future, and this will be our decision next fall, we will go on adapting the intensity of this monetary policy.”
The French central-bank governor’s remarks may be the most definitive yet on when the ECB will take action on its €2.3 trillion asset-purchase program, which is currently scheduled to run until the end of the year. While he is just one of 25 Governing Council members who decide monetary policy for the currency bloc, concerns are rising among some of his colleagues that time is running out if they are to avoid undesirable market volatility.
Villeroy de Galhau’s choice of wording “adapt the intensity”, which he said three times, adds to signs that the ECB intends to pare back stimulus in a way that doesn’t tighten financial conditions. Officials are concerned that while growth is picking up, inflation and wages are not.
President Mario Draghi signaled last month that he sees the expanding economy as allowing room for maneuver on stimulus while still maintaining the same level of monetary accommodation. Executive Board member Benoit Coeure said in remarks published on Friday that the ECB’s action last December, when it announced a cut in monthly bond purchases to €60bn from €80bn starting in April this year, is a guide for how to make policy adjustments in future. Coeure also said that it is important for the central bank to be transparent in its communications.