President Christine Lagarde quoted as saying by a German daily that the European Central Bank is likely to stop further bond purchases under its pandemic-era support scheme from early next year but will still have other purchasing programmes in its toolkit.
The European Central Bank backstop Pandemic Emergency Purchase Programme has allowed the vulnerable bond markets of Italy, Spain, Portugal and Greece to borrow and spend freely during the coronaviruses epidemic, without being punished by investors.
Given current circumstances, I expect that we will not carry out any further PEPP bond purchases from early next year," Lagarde was quoted by the Frankfurter Allgemeine Zeitung as saying.
That doesn't mean that PEPP will be finished because we have to replace the expired bonds. We have other purchase programmes in our toolkit. Her comments came after two ECB policymakers said the euro zone's economy faced a new challenge due to a rise in coronaviruses and a new variant of coronaviruses.
Lagarde said the ECB will act on interest rates when necessary and when the price rises to 2% on a sustained basis, but she expects inflation to fall from January.
It is eye-catching and worrying for a lot of people, but we do not expect a rise in inflation to last, Lagarde said.
It will calm down next year. We expect the inflation rate to fall from January onwards.