(BN) ECB’s Hawks Target Early 2023 to Start Unwinding Balance Sheet

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10/13/2022 21:28:03[BN] 

ECB’s Hawks Target Early 2023 to Start Unwinding Balance Sheet

Officials favor balance-sheet shrinkage to run in background

Framework decision on QT would mean they can refocus on rates

By Jana Randow and William Horobin

(Bloomberg) — Hawkish European Central Bank officials aim to start unwinding

the institution’s €5.1 trillion ($4.9 trillion) asset hoard by early 2023 while

retaining interest rates as their primary monetary-policy tool, according to

people familiar with the matter. 

A consensus is emerging among some Governing Council members that the

process of shrinking the balance should run in the background while the ECB

focuses on setting borrowing costs, they said, declining to be identified

because discussions on the matter are private. 

That would require a decision on a framework that could then be revisited after

a period of time, the people said. The officials favor letting bonds mature

rather than resorting to debt sales, though that option shouldn’t be entirely

excluded. They could also envisage keeping up some reinvestments to

moderate the pace of unwinding. 

An ECB spokesperson declined to comment on plans to unwind the balance

sheet.

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