ECB's Knot says QE program needs to end 'as soon as possible'

[AMSTERDAM] The European Central Bank (ECB) has to end its quantitative easing as soon as possible, according to ECB Governing Council member Klaas Knot, who said there's not a single reason anymore to continue with the program.

"The program has done what could realistically be expected of it," Mr Knot, who also heads the Dutch Central Bank, said in an interview on the television talk show Buitenhof on Sunday.

The ECB is inching closer to unwinding unprecedented stimulus. At their December meeting, officials held out the prospect of a change in policy language early in the year, and some governors have since expressed their favour for taking a first step in March.

While President Mario Draghi said Thursday that confidence in a sustained pickup in inflation has increased, patience and persistence are still warranted as progress so far remains muted.

Mr Knot, 50, said there's enough proof for the ECB to end its QE program in September, adding that's also the current sentiment in the Governing Council. The ECB stuck by its plan to continue buying 30 billion euros (S$48.8 billion) of assets a month until at least the end of September, and has reiterated that interest rates will stay low well beyond that.

Inflation probably slowed to 1.3 per cent in January, according to a survey of economists before a report on Wednesday. On Tuesday, data will probably show a 19th consecutive quarter of expansion at the end of 2017.

Euro Surge

Mr Knot said the lack of commitment to any communication by the ECB as to what might happen to the QE program beyond September could have a dampening affect on the euro. A 6 per cent surge in the euro since mid-December is threatening to become a thorn in the economy's side if it curbs exports and damps prices. The rally was fuelled by US Treasury Secretary Steven Mnuchin's remarks last week that appeared to welcome a weaker US dollar.

Since then, policy makers including ECB president Draghi, executive board member Benoit Coeure and Bank of France Governor Francois Villeroy de Galhau have politely reminded US officials of a global commitment to refrain from targeting exchange rates to gain a competitive advantage.

BLOOMBERG