ECB Chief Economist: "ECB Will Respond Appropriately Following Fed Tapering"

Philip Lane "It's Too Early to Discuss Ending Quantitative Easing"

Philip Lane, Chief Economist of the European Central Bank (ECB)
Photo by Reuters Yonhap News

[Asia Economy Reporter Park Byung-hee] "If the Federal Reserve's (Fed) tapering (reduction of asset purchases) affects the Eurozone financial market, the European Central Bank (ECB) will act appropriately as already declared."

Philip Lane, Chief Economist of the ECB, said in an interview with a foreign media outlet on the 25th (local time) that the ECB could take measures after the Fed's tapering is decided. Lane emphasized, "The ECB is not a timid bystander."

However, he noted that after the Fed decides on tapering, exchange rates might move to reduce financial market turmoil, and the ECB will primarily monitor exchange rates. This implies that even if the Fed proceeds with tapering, the ECB will carefully decide whether to reduce quantitative easing.

Last year, the ECB introduced the Pandemic Emergency Purchase Programme (PEPP) to respond to the economic shock caused by COVID-19. Under PEPP, the ECB is pursuing a quantitative easing policy to purchase assets worth 1.85 trillion euros until March next year.

Recently, with the Fed's tapering prospects emerging and Eurozone inflation rising, some ECB monetary policy members, including Jens Weidmann, President of the Bundesbank (Germany's central bank), argue that the end of quantitative easing should be discussed.

However, Lane stated that since the quantitative easing policy is scheduled to continue until March next year, it is too early to discuss its termination. He emphasized that even after ending quantitative easing, if the Eurozone inflation rate remains below the ECB's policy target of 2%, another asset purchase policy should be implemented. He said, "The end of PEPP does not mean that the ECB's role in quantitative easing policies disappears."

Lane also predicted that although the COVID-19 Delta variant is spreading rapidly in Europe recently, its impact on the economy will be limited. He assessed that the Eurozone is currently showing an economic recovery consistent with the ECB's growth forecast from last June. At that time, the ECB expected the Eurozone economic growth rate to be 4.6% this year and 4.7% next year.

This content was produced with the assistance of AI translation services.