The Strategist

Economists: The ECB should curtail QE in 2018

12/01/2017 - 13:15

The European Central Bank (ECB) should complete a program of monthly purchases of assets in December, according to most economists surveyed by Reuters. The experts differ in opinions on the question whether the regulator will go for it.

INSM via flickr
INSM via flickr
Most respondents believe that the ECB's quantitative easing program (QE) will be completed by the end of next year, and only a few reckon that this will happen in mid-2019.

Completion of the ECB's asset buying program will keep pace with the actions of other major central banks that tighten monetary policy, despite the fact that inflation in these countries has not reached the targets, which is expected to continue in this and next years.

The latest poll of more than 65 economists, held on November 24-29, also highlights the confidence in the euro zone economy. The current growth is expected to continue next year, even if a significant increase in inflation is not the main goal.

Against the backdrop of the best growth in the euro zone in a decade, the ECB announced in October that it would reduce monthly purchases of bonds to 30 billion euro per month from January to September 2018. Currently, the regulator purchases bonds worth 60 billion euro a month.

While the central bank retained its opportunity to expand the quantitative easing program after September, the members of the Governing Council of the ECB were divided on this point, as was evident from the minutes of the October meeting.

About 34 of the 52 economists who answered the additional question said that the ECB should complete its quantitative easing program in December.

At that, 52 of the 60 economists who answered another question expect that the central bank will stop its printing press before the end of next year.

Only a few respondents expect the ECB to continue buying bonds next year.

Although recent expectations are consistent with other major central banks trying to abandon the ultra-soft monetary policy or, in some cases, raise interest rates, the ECB is unanimously expected that it will not change the rate at the next meeting on December 14.

But expectations about the price pressure in the currency block in the last poll did not change compared to the previous month, while inflation should not exceed the central bank's target by just under 2%, at least until the second half of 2019.

Experts predict that that inflation this year will be an average of 1.5%, 1.4% - in the next and 1.6% - in 2019.