ECB is said to see option for ending QE with short taper in 2018

[FRANKFURT] European Central Bank policy makers implicitly assume their newly-extended bond-buying programme will be tapered to a halt by the end of next year so long as the inflation outlook improves, according to officials with knowledge of the discussions.

The Governing Council, which met on Thursday, focused on the first nine months of next year for its quantitative-easing programme and didn't formally debate options for what to do after that, said the people, asking not to be named because the talks are private. 

While tapering would be possible, extending the programme without changing the pace of purchases is also a credible option if inflation doesn't show sufficient progress, one of them said.

Policy makers agreed to cut monthly bond buying in half, to 30 billion euros (S$47.9 billion), and President Mario Draghi said that a "large majority" backed the decision to include a pledge to extend again if needed. He added that "it's never been our view that things should stop suddenly".

That decision came after governors were presented with several scenarios at a seminar on Wednesday, according to the people. Those included a reduction to 40 billion euros a month through June, and a 12-month tapering through December, similar to the Federal Reserve's exit from its own programme. The latter scenario wasn't considered a realistic policy option, one of the people said.

Governors also looked at a three-month scenario that would see buying after September tapered in monthly steps to 20 billion euros, 10 billion euros and 5 billion euros, another official said.

An ECB spokesman declined to comment on the Governing Council's deliberations.

BLOOMBERG