The bond-buying options presented to policy makers this week involved combinations of monthly volumes and durations that all stick to existing limits, the people said, asking not to be named as the Governing Council’s deliberations are confidential.
The people declined to identify the specifics of the scenarios, but said they are within market expectations. An ECB spokesman declined to comment.
Two and a half years and more than €2tn ($2.4tn) into quantitative easing, with economic growth broadening across the currency bloc, the ECB has started formal talks on how and when it might wind down monthly purchases.
President Mario Draghi said on Thursday that the decisions are “many, complex” and involve risks, and the “bulk” of them would likely be taken in October.
The possibilities included — but weren’t limited to — reducing the monthly purchase target to €40bn or €20bn, with extension options including 6 months or 9 months, Reuters reported, citing unidentified sources.
Draghi, speaking to reporters in Frankfurt on Thursday after the Governing Council meeting, said only that the discussions were about the length of the programme and the size of the monthly flows.
Finnish Governor Erkki Liikanen said yesterday that some elements may not be settled until December.
“Draghi said we will have a meeting in October where we will discuss these issues. It may be that some fine tuning will take place even after that, but the details and parameters will be known in good time before the programme ends,” Liikanen said in Helsinki. “We need to hone the details to get them right.”
Jens Weidmann, president of Germany’s Bundesbank, said in Hamburg yesterday that one reason the Governing Council decided to wait for now is uncertainty over the path of inflation, which has been persistently low. Even so, he warned that officials should be careful “not to miss the right moment to act.”
Philip Lane, governor of Ireland’s central bank, told reporters in Dublin that discussions would go beyond just the asset-purchase programme.
“The deeper question is what is the overall monetary stance, which has many elements,” he said yesterday. “We have the policy rate, the forward guidance, asset-purchase programme and other measures which are not currently active but, as a matter of logic, they are part of what can be done.”
One challenge facing the ECB, commonly raised by economists, is that it could run out of debt to buy before it succeeds in putting consumer-price growth on a sustained path to its goal of just under 2%. Its rules include buying no more than 33% of sovereign debt by issue or issuer, or 50% of supranational debt.
The national central banks that carry out the asset purchases also stick roughly to the ECB’s capital key — meaning they buy in proportion to the relative size of their economies — though the rules allow temporary deviations.
The flexible approach on the capital key has so far led to more bonds being bought from nations with higher debt burdens — especially Italy.
France may also benefit as a growing shortage in countries including Germany, Portugal and Ireland curbs the ECB’s options for new purchases.
Italy’s 10-year bond yield climbed to 1.958% at 11:52am.
Frankfurt time, and the German equivalent rose to 0.310%. The euro was up 0.3% at $1.2062.
While the central bank’s limits are self-imposed, officials have said they accept that legal and institutional constraints would make changing them difficult.
Some critics allege that the programme already breaches a ban on monetary financing of governments, and the ECB is awaiting a ruling by the European Court of Justice after Germany’s top court asked for guidance.