HELSINKI- The European Central Bank must still provide copious stimulus and will discuss a transition away from emergency bond purchases in "due course," possibly as soon as September, Finnish central bank chief Olli Rehn said on Tuesday.
The ECB last week decided to maintain an elevated pace of bond purchases and did not even discuss a reduction or tapering of its 1.85 trillion euro Pandemic Emergency Purchase Programme, even as the euro zone is now clearly on the mend.
"It is likely that as some point, my assumption is September, we will discuss the way forward, but as said, it's now important to be rather safe than sorry," Rehn told a news conference.
"Now it is essential that we ensure favourable financing conditions, which implies we need to continue with the significant purchases under PEPP as we agreed last week," Rehn said.
Rehn added that PEPP will run at least until next March, as repeatedly decided by the ECB and he fully stands behind last the Governing Council's decisions.
The ECB will next release economic projections on Sept. 9 and ECB watchers see this as the first possible date for the bank to discuss how it would wind down emergency bond buys and transition back to an older, but more rigid Asset Purchase Programme.
Even as PEPP is wound down, the ECB is expected to maintain support through other tools for years to come as inflation is expected to undershoot its target beyond its projection horizon.
While some policymakers warned that the ECB might be underestimating inflation, Rehn argued that this year's jump in prices is temporary and the ECB must look through this rise.
(Reporting by Essi Lehto, Writing by Balazs Koranyi, Editing by Catherine Evans and Ed Osmond) ((Balazs.Koranyi@thomsonreuters.com; +49 30 220 133 623; Reuters Messaging: balazs.koranyi.thomsonreuters.com@reuters.net))
