UPDATE 2-ECB homes in on 9 more months of bond buying, at lower volumes

From Reuters - October 13, 2017

* 9-month extension seen pushing out rate hike horizon

* Asset buys could be reduced to 25-40 bln euro

* Weidmann wants to stick to issuer limit, national quotas (Adds Weidmann, detail)

By Balazs Koranyi

WASHINGTON, Oct 13 (Reuters) - European Central Bank policymakers are homing in on extending their stimulus programme for nine months at their next meeting while scaling it back, five people with direct knowledge of discussions told Reuters.

The ECBs asset purchases are due to expire at the end of the year, and policymakers are set to decide on Oct. 26 whether to prolong them. They will have to reconcile the blocs best growth run in a decade with an inflation rate expected to undershoot the banks target of almost 2 percent for years.

The next move is still up for discussion, but there is a consensus that it should signal both the need to cut support in light of strong economic growth, while also committing to an extended period of monetary accommodation, the sources said.

The biggest debate is likely to be whether to keep the programme open ended, giving the ECB the flexibility to extend it once again, or to send a firm signal about the end, they said.

While hawks led by Germany want the ECB to signal its intent to wind down and end the purchases, policy doves want at least the same type of flexibility the bank has now to extend purchases in case the outlook worsens.

Whether its open- or closed-ended is going to be the biggest debate, said one of the sources, who are all on or close to the ECBs Governing Council.

I can see a compromise that well keep it like it is now, so with an end date that could let us extend again if necessary.

The volumes of monthly purchases under the extended scheme was still up for discussion, with views ranging between 25 billion euros and 40 billion euros. But the sources said there was a general feeling that they needed to be sharply reduced from the current 60 billion euros.



Continue reading at Reuters »