LISBON — The European Central Bank (ECB) is hopeful brighter data in coming quarters will confirm that the amount of its €1.85-trillion ($2.21 trillion) Pandemic Emergency Purchase Program set in December was appropriate, ECB policy maker Mario Centeno said.
Centeno told Reuters on Monday the ECB would adjust the money-printing scheme, which has so far been “quite successful,” on a monthly basis to respond to challenges after new lockdowns in the first quarter dampened recovery in Europe.
“So the decision is going to be taken on a monthly basis, because we can adapt the baseline amount up or down depending on market conditions,” the Bank of Portugal governor said during the interview — his first after the ECB’s meeting on Thursday — at the Money Museum adjacent to the central bank.
However, as countries revised growth for the last three months of 2020 upwards, the carry-over effect may offset part of the negative economic impact early in 2021, Mr. Centeno said.
“We now continue to be hopeful that the second and third quarters will prove that the trajectory was right, and if that happens, then the decision that we took in December about the (PEPP) amount is appropriate,” he said.
“No one challenged that in our debates” during Thursday’s ECB Governing Council, he added, explaining that the ECB remained flexible about whether to use up the whole amount.
But he warned that policy makers needed to be “humble” in their assessments and much still depended on new variants of the virus and vaccinations, making immediate forecasts riskier than projections for the second half of the year.
“Hopefully we can all look at the numbers and say ‘hey, the summer was OK, the services sector across Europe has been able to guarantee cash flows to get into the future in a much stronger position’ — this is not the case yet.”
“We are quite happy with the impact of PEPP (but)… the second and third waves of the pandemic show us we are still under emergency procedures, not yet out of the woods, we are very far from that yet and we must keep all our policies actively in place.”
‘NEXT GENERATION’ FUNDS
He also called for a swift approval of the European Union’s (EU) €750-billion Next Generation EU spending package, which is taking “longer than we’d like”, but acknowledged that the EU process needed to run its course for maximum beneficial effect.
Mr. Centeno said the monetary policy’s potential in dealing with the crisis, which he argues is temporary and not structural, has not been exhausted yet, and works even better when complemented with EU fiscal measures.
Despite a recent surge in euro zone bond yields, Mr. Centeno said adopting yield curve control was unlikely to be needed and in any case he “would not support its strong implementation.”
“Again we are quite happy with the way our policies are responding to the crisis and I don’t see a reason for us to change that. If time comes (to seriously consider curve control)…we will get to that point, but honestly I don’t see that happening.” — Reuters