ECB slows pandemic bond buying as Europe's economy rebounds

[FRANKFURT] The European Central Bank (ECB) will slow down the pace of its pandemic bond-buying programme, an acknowledgment that the euro area's recovery is strong enough to endure on less support.

The Governing Council decided to conduct purchases at a "moderately lower pace" than the roughly 80 billion euros (S$127.2 billion) of monthly acquisitions deployed in the past two quarters, according to a statement on Thursday.

Officials also reiterated a pledge to keep the 1.85 trillion euro programme running until March 2022 or later if needed, signalling that they are not yet ready to discuss how and when to end emergency stimulus. Their stance differs from that of the US Federal Reserve, whose policymakers are preparing to start a wind-down of asset purchases later this year.

The euro extended an advance, trading up 0.2 per cent at around US$1.1838. Italy's 10-year yield premium over its German counterpart - a major gauge of risk in the euro-area - fell to 104 basis points, the lowest since August 25.

With supply-chain disruptions and resurgent coronavirus infections threatening to undermine the recovery and medium-term price pressures likely to remain well below the 2 per cent goal, officials have insisted in recent weeks that the euro-area economy is in a different state than the US and remains reliant on ECB support.

Yet some governors have started to warn publicly that maintaining an ultra-accommodative stance for too long also carries risks. Austria's Robert Holzmann and Klaas Knot of the Netherlands both told Bloomberg in separate interviews last week that emergency asset purchases should end in March, hinting at heated discussions about the policy path in the months ahead.

BLOOMBERG