ECB Executive Board member Isabel Schnabel said in a speech, “how today’s attack on Ukraine changes the euro area outlook is highly uncertain at this stage. We are monitoring the situation closely and will carefully evaluate the consequences for our policies.”

But “predating the war”, however, inflationary pressures will likely prove stronger and more persistent over both the near and the medium term”. “policy optionality” is there fore needed.

The “calibration and the time of adjustment of our policy instruments are data-dependent”, but the “sequence… is not”. The forward guidance has provided the conditions for policy rates to be raised. Net purchases under the APP will stop “shortly before” rate hikes. Reinvestment will continue for an “extended period of time” past rate hikes.

Balance sheet adjustments may not be well-suited as the main instrument for controlling the overall stance. Hence “policy lift-off will predate with some distance a reduction of our balance sheet.”

Overall, she concluded, the “shock of war hanging over Europe has clouded the global outlook”. The “uncertainty speaks in favour of a gradual and data-dependent normalisation that respects the sequence that we have communicated, with a view to reducing uncertainty about our actions and intentions.”

Full speech here.

ECB Governing Council member Yannis Stournaras said in a Reuters interview that the asset purchase program should continue until at least the end of the year, to cushion the fallout from the Ukraine crisis.

He said, “judging the situation from today’s point of view, I would rather favour a continuation of the APP at least until the end of the year, beyond September, rather than bringing the end closer… I wouldn’t be in favour of announcing the end of APP in March.”

Stournaras added that the crisis was bound to depress prices “in the medium to long term” after an initial spike.”In my view it is going to have a short-term inflationary effect – that is prices will increase due to higher energy costs,” he said. “But in the medium to long term I think that the consequences will be deflationary through adverse trade effects and of course through the rise in energy prices.”

ECB Chief Economist Philip Lane said in an interview, “if inflation rates are moving towards our target in the medium term, which is now looking more likely – instead of being well below two per cent as before the pandemic – we will adjust monetary policy”. That’s because, “we would then, for example, no longer need to make asset purchases to stabilise inflation at our target over the medium term.”

“It was different in December, when surveys still showed the expectation that we would need to maintain asset purchases until the middle of next year, but the timeline may be shorter than what people expected then,” he added.

Lane also reiterated the “sequencing” of policy normalization. That is, “our net assets purchases will first be scaled down, then ended. Then, the key policy rates will only increase above their current levels if the conditions consistent with our medium-term inflation target are met. So before we talk about potential rate decisions, we need to end net asset purchases. And we need to prepare the market for the eventual end of these purchases.

Full interview here.

ECB Vice President Luis de Guindos said asset purchases need to be completed before interest rates can rise. However, “we will look at the data, the projections and then we will readjust asset purchases if needed and will see when an interest rate hike can take place.”

Governing Council member Bostjan Vasle said the Eurofi Magazine, “The time seems right for our monetary policy to move out of crisis mode and start the process of gradual normalisation.”

“With the return of economic activity to the pre-crisis level, looming labour shortages and in part structural pressures on energy prices, our monetary policy needs to start rebuilding its space to be ready to respond to the next business cycle,” Vasle added.