TALLINN (Reuters) - Winding down bond purchases to zero will be “a minor issue” for the European Central Bank because of a bulked up balance sheet and a commitment to keep interest rates low, ECB policymaker Ardo Hansson said on Wednesday.
The ECB agreed last week to halve bond buys from next year but also extended the scheme by nine months, arguing that stubbornly low inflation requires continued stimulus, even if growth continues to outperform expectations and policymakers were somewhat more optimistic.
“How we move in the future ... to zero, is actually a very minor issue in the context where the stock of accumulated purchases is already in the trillions of euros,” Hansson told Reuters. “So the question about 10 billion euros (£8.7 billion) there or the precise phasing, I think is not really a material issue.”
The comments suggest that the ECB will continue taking the emphasis off the purchases, focusing instead of other tools, including conventional measures such as interest rates, and preparing markets for winding down quantitative easing after nearly three years and bond purchases exceeding 2 trillion euros.
They came just days after ECB Executive Board member Benoit Coeure said he ‘hoped’ the bank had extended the bond buys, designed to boost inflation, for the last time.
Hansson, Estonia’s central bank chief, called the euro zone’s growth momentum fantastic and argued that the output gap or the difference between actual and potential output, is closing “very quickly”.
In a potential victory for policy hawks, the bond buys may be skewed more towards the private sector next year, with the share of corporate and covered bonds rising, even if purchase volumes will not go up.
“I don’t think anyone is talking about ramping up (private sector buys), so it is just maintaining the significant purchases and therefore the share of the private sector element can grow,” Hansson said on the sidelines of a news conference.
“I have always been a rather big fan of corporate sector bond buying,” Hansson said. “So getting the mix in that direction is positive because ... money directly from the central bank to enterprises rather than moving from indirectly through portfolio rebalancing via government bonds, is a much more potent channel to use.”
The ECB has not said how it will divide purchases between public and private sector debt next year with more detail on the composition of buys likely announced in December.
Reporting by David Mardiste; Writing by Balazs Koranyi; Editing by Francesco Canepa/Jeremy Gaunt