June 20, 2018 / 8:39 AM / 9 months ago

Monetary policy to stay accommodative as ECB normalises - Villeroy

FILE PHOTO: Governor of the Bank of France Francois Villeroy de Galhau in Berlin, Germany, September 23, 2016. REUTERS/Axel Schmidt/File Photo

PARIS (Reuters) - The European Central Bank’s (ECB) monetary policy will remain loose even though it is on track to end bond purchases at the end of the year and possibly raise rates next summer, ECB policymaker Francois Villeroy de Galhau said on Wednesday.

The ECB took its biggest step yet last Thursday towards winding down its crisis-era programme of stimulus, announcing plans to close down its exceptional bond purchase scheme by the year-end.

Flagging new guidance for its future monetary policy path, it also signalled that it expected interest rates to remain steady at least through the summer of 2019.

In an annual report on the French and euro zone economy, Villeroy, who is also head of the Bank of France, said: “Net asset purchases should end in December; the first interest rate rise could come as of the summer of 2019.”

“That said, monetary policy will remain accommodative,” Villeroy said, adding that the ECB’s large stock of assets would help keep long-term financing conditions favourable.

After Thursday’s ECB meeting, three sources told Reuters that policymakers had differed on whether to keep the door more open to a new extension of the ECB’s stimulus scheme and on the likely timing of its first rate hike since 2011.

Reporting by Leigh Thomas; Editing by Sudip Kar-Gupta

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