With the ECB’s next policy update less than two weeks away, the institution’s top officials are expressing confidence that they will eventually succeed in returning inflation to their goal.
“We are confident that as the conditions will continue to improve, the inflation rate will gradually converge in a self-sustained manner, as we’ve defined many times, and in a durable way to our objective,” ECB president Mario Draghi told reporters in Washington. “But together with our confidence we should also be patient because it’s going to take time.”
Mr Draghi’s confidence was reiterated yesterday by vice president Vitor Constancio, and comes as policy makers prepare for a meeting on October 26 that is widely expected to set out the plan for their bond-buying programme past the end of this year.
While the ECB currently purchases €60bn of assets per month, officials are debating how they may be able to scale back some of that stimulus to adapt to an improving economy.
The ECB president repeated on the sidelines of the annual meetings of the IMF that the Governing Council intends to take the “bulk” of its decisions this month.
Mr Constancio added that the Governing Council’s actions will focus on “safeguarding the monetary policy impulse that is still necessary to secure a sustained adjustment in the path of inflation.”
“The euro area economy is experiencing a broad-based, robust and resilient recovery,” Mr Constancio said.
“Despite this favourable growth dynamic, inflation developments have been subdued. We remain confident that the continued closing of the output gap will lead inflation to return to our medium-term objective,” he said.
One idea that has been publicly floated by the ECB’s chief economist, Peter Praet, is a bigger reduction in monthly buying in exchange for a longer duration of the programme.
Mr Draghi told reporters that Mr Praet “had said it very well”.
Subdued nominal wage growth is currently the main factor holding down underlying price pressures, which still don’t show “a convincing sign of moving upward”, Mr Draghi said.
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