The European Central Bank will step up its asset purchases in May and June, ahead of the traditional holiday period when market liquidity will be lower, to meet its monthly target of EUR 60 billion, ECB Executive Board member Benoit Coeure said. Elsewhere on Tuesday, ECB Governing Council member Christian Noyer said the bank stands ready to take further steps to meet its price stability mandate.
In a speech delivered in London on Monday and the text of which was published on the ECB website on Tuesday, Coeure said, “We are also aware of seasonal patterns in fixed-income market activity with the traditional holiday period from mid-July to August characterized by notably lower market liquidity.”
“The Eurosystem is taking this into account in the implementation of its expanded asset purchase programme by moderately frontloading its purchase activity in May and June, which will allow us to maintain our monthly average of ?60 billion, while having to buy less in the holiday period,” the policymaker said.
“If need be, the frontloading may be complemented by some backloading in September when market liquidity is expected to improve again. The slightly higher purchase volume that market analysts may observe in the coming weeks is therefore unrelated to the recent episode of market volatility.”
While saying that the recent sell-off in bond prices was not a cause for concern, Coeure expressed worry over the “rapidity of the reversal”. The reversal reflects a market correction, recreates two-way risk in the market and reflects the fact that ECB’s stimulus is taking effect, scaling back some pessimistic assumptions of future growth and inflation path are being revised, he noted.
“After several similar episodes, it is yet another incident of extreme volatility in global capital markets showing signs of reduced liquidity,” Coeure said.
Bank of France Chief Noyer also acknowledged that the ECB’s quantitative easing has had a positive impact on inflation expectations. He said that the central bank was ready to take further action, if needed, to meet its mandate of keeping inflation “below, but close to 2 percent”.
“The Eurosystem is ready to go further if necessary to deliver on its mandate of maintaining inflation close to but below 2 percent,” Noyer said in a conference in Paris.
The material has been provided by InstaForex Company – www.instaforex.com