FRANKFURT, Apr 8 (Reuters) – European Central Bank officials at their meeting last month discussed a minor increase in bond purchases and agreed to bring them forward this quarter on the condition that they be cut later if circumstances permit, government officials showed. minutes of their meeting on Thursday.
Concerned that a rise in yields could derail an eventual recovery, ECB policy makers decided in March to increase bond purchases “significantly” and undo some of the rising cost of borrowing, which was seen as a reflection of a global review instead of better economic prospects.
Monthly purchases of € 1.85 trillion of ECB bonds under the Pandemic Emergency Purchase Program (PEPP) increased by more than a fifth last month, enough to stabilize returns nominal bonds and return inflation-adjusted yields to their lows at the beginning of the year.
However, some authorities argued that a smaller increase in bond purchases would better reflect a more balanced risk assessment and expectations for faster growth.
“All members joined in a broad consensus around the proposal put forward by (Chief Economist Philip) Lane, with the understanding that the PEPP’s total endowment was not being questioned under current conditions and that the pace of purchases it could be reduced in the future, “showed the count of the meeting held on March 10 and 11.
“It was stressed that the flexibility built into the PEPP is symmetrical, which implies that the buying rhythm could be increased and decreased according to market conditions,” the ECB said.
The entity will revisit the rhythm of purchases in June. Several authorities, such as the head of the Dutch central bank, Klaas Knot, and the Austrian Robert Holzmann, have already expressed their hope that the ECB can begin to reduce purchases in the third quarter, as the pace of vaccines accelerates. and the health crisis subsides.
The accounts also showed a division of opinion on the assessment of increased returns. The authorities agreed that the rise was premature, but some argued that it is not significant, reflects better inflation prospects and borrowing costs are still very low.
Some also argued that an increase in the return on government bonds must be significant and persistent to affect borrowing costs.
“It was argued that higher real rates are not necessarily a cause for concern and should not trigger policy intervention if they reflected higher growth prospects rather than higher real-term premiums,” the ECB said.
The entity will meet again on April 22, but that session is seen as more of a position-holding meeting, as the outlook remains stable and heavily dependent on the pace of vaccinations.
(Reporting by Balazs Koranyi; edited in Spanish by Carlos Serrano)