January 30, 2018 / 4:00 PM / a year ago

ECB's Knot says short taper acceptable at end of QE

European Central Bank (ECB) governing council member Klaas Knot attends a forum organised by Mexico's Central Bank in Mexico City October 15, 2013. REUTERS/Tomas Bravo

AMSTERDAM (Reuters) - The European Central Bank should end its asset buys after September as inflation was on its way towards the bank’s target but a short phasing-out period is acceptable, Dutch central bank chief Klaas Knot said on Tuesday.

“It’s reasonable for the asset purchase programme to come to an end after September, with a short tapering period if needed,” Knot said. “Only after that we will turn to other instruments like our policy rates.”

The comments suggest that Knot, considered a policy hawk on the ECB’s Governing Council, is willing to accept that the programme be wound down gradually instead of ending it in a single step.

A tapering period is significant as the ECB ties the timing of the first rate hike to the end of asset buys, so any extension, would push out the timing of the first rate hike.

“Given the current pace of economic expansion I’m confident that in the medium term euro area inflation will return to below but close to 2 percent”, Knot said.

Reporting by Bart Beijer; Writing by Balazs Koranyi; Editing by Francesco Canepa

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