HomeLive CommentsECB Praet prefer not to revise forward guidances too early

ECB Praet prefer not to revise forward guidances too early

ECB chief economist Peter Praet sounds cautious as usual. In the latest ECB meeting, the central bank took away the option to expand the asset purchase program again. But going further, Praet said “I would not revise the guidance too early, because that could send wrong signals about the end of our net asset purchases.” And, “I wouldn’t say there is a date or a deadline” for the program.

He also added that “it is clear that if you believe that the degree of slack is higher, then the process of convergence to below, but close to, 2 percent over the medium term would be drawn out. ” And, “other things being equal, it would (mean a) shallower (inflation path)”.

Referring to ECB’s pledge to keep interest at current level “well past” end of asset purchase, Praet said “markets quantify the ‘well past’ interval as ‘up to next spring’.” And he emphasized that “once you stop net asset purchases the signaling aspect of the asset purchase program disappears and you therefore have to be much more precise about the future path of the short term rates.”

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