Constancio: Report That ECB Near Taper Consensus ‘Not Correct’

By David Barwick

WASHINGTON (MNI) – The media report earlier this week suggesting that the European Central Bank is nearing a decision in favor of tapering its program of quantitative easing was not correct, ECB Vice President Vitor Constancio told MNI on Thursday.

Constancio, speaking on the margins of the Annual Meeting of the IMF, dismissed as nothing but rumors the story that reported on Monday that there was already an "informal consensus among ECB policy makers" to taper and cited one scenario in which the pace of QE would decelerate in steps of ten billion euros a month.

In fact, the Governing Council has not discussed the matter and quantitative easing will continue until monetary authorities are satisfied that inflation is recovering sustainably in line with their price stability mandate, the ECB Vice President emphasized.

"It’s not correct, period," he said of the story. "Indeed, we have not discussed anything about the timetable of QE. So all the rumors are just that, rumors without any foundation."

QE "will go on until we are satisfied that inflation is truly on the path to our objective, and at least until March of next year," he said.

March is "not necessarily a final date," he stressed. "We still have to discuss that and we have not yet discussed that in the Governing Council at all."

Markets will certainly receive the proper guidance about the future of the asset purchase program before March, he said, but the precise timing of such guidance is also something the Council has yet to start considering.

To the suggestion that December would be the proper moment for the ECB to provide clarity, Constancio responded by reminding that the ECB had "tasked the relevant committees to study alternatives regarding some of the parameters, just to prepare the terrain for any decision that we may wish to take. And that’s that; that’s where we are."

For now it is clear that the ECB is still in "accommodative mode, waiting for the consolidation of a sustained path of inflation towards our objective," he said.

"And I am very confident that indeed our baseline scenario is materializing and that by the Spring of next year we will have inflation well above 1%," he added.

A delayed negative effect from the UK’s vote to leave the European Union, which so far has had only a minor impact, is not a worry over the relevant time horizon, he indicated.

"Our projections show that over the time span of 18 months the effect of Brexit is really quite small," he said. "So that’s the reality and it’s not a factor."

To be sure, recent economic indicators have been "somewhat mixed," he conceded, "but on the whole, my take is that our baseline scenario is indeed materializing."

With respect to the IMF’s suggestion in its recently updated World Economic Outlook that the ECB might have to expand its purchase program, Constancio said merely, "That’s their view."

–MNI Frankfurt Bureau; tel: +49 69-720-142; email: david.barwick@mni-news.com

[TOPICS: M$X$$$,MT$$$$,MX$$$$,M$$EC$]

Constancio: Report That ECB Near Taper Consensus ‘Not Correct’

By David Barwick

WASHINGTON (MNI) – The media report earlier this week suggesting that the European Central Bank is nearing a decision in favor of tapering its program of quantitative easing was not correct, ECB Vice President Vitor Constancio told MNI on Thursday.

Constancio, speaking on the margins of the Annual Meeting of the IMF, dismissed as nothing but rumors the story that reported on Monday that there was already an "informal consensus among ECB policy makers" to taper and cited one scenario in which the pace of QE would decelerate in steps of ten billion euros a month.

In fact, the Governing Council has not discussed the matter and quantitative easing will continue until monetary authorities are satisfied that inflation is recovering sustainably in line with their price stability mandate, the ECB Vice President emphasized.

"It’s not correct, period," he said of the story. "Indeed, we have not discussed anything about the timetable of QE. So all the rumors are just that, rumors without any foundation."

QE "will go on until we are satisfied that inflation is truly on the path to our objective, and at least until March of next year," he said.

March is "not necessarily a final date," he stressed. "We still have to discuss that and we have not yet discussed that in the Governing Council at all."

Markets will certainly receive the proper guidance about the future of the asset purchase program before March, he said, but the precise timing of such guidance is also something the Council has yet to start considering.

To the suggestion that December would be the proper moment for the ECB to provide clarity, Constancio responded by reminding that the ECB had "tasked the relevant committees to study alternatives regarding some of the parameters, just to prepare the terrain for any decision that we may wish to take. And that’s that; that’s where we are."

For now it is clear that the ECB is still in "accommodative mode, waiting for the consolidation of a sustained path of inflation towards our objective," he said.

"And I am very confident that indeed our baseline scenario is materializing and that by the Spring of next year we will have inflation well above 1%," he added.

A delayed negative effect from the UK’s vote to leave the European Union, which so far has had only a minor impact, is not a worry over the relevant time horizon, he indicated.

"Our projections show that over the time span of 18 months the effect of Brexit is really quite small," he said. "So that’s the reality and it’s not a factor."

To be sure, recent economic indicators have been "somewhat mixed," he conceded, "but on the whole, my take is that our baseline scenario is indeed materializing."

With respect to the IMF’s suggestion in its recently updated World Economic Outlook that the ECB might have to expand its purchase program, Constancio said merely, "That’s their view."

–MNI Frankfurt Bureau; tel: +49 69-720-142; email: david.barwick@mni-news.com

[TOPICS: M$X$$$,MT$$$$,MX$$$$,M$$EC$]