FRANKFURT -The European Central Bank cannot transfer the full flexibility of its emergency stimulus schemes to other standing instruments, ECB board member Isabel Schnabel said on Thursday, pushing back on some calls to ease the rules around more conventional bond buys.
Looking to prop up the bloc amid a deep and scarring recession, the ECB agreed on exceptional flexibility for its 1.85 trillion euro Pandemic Emergency Purchase Programme last year but the scheme is expected to conclude, possibly as soon as next March, raising the risk of an ECB retreat in some markets.
More traditional instruments, like the Asset Purchase Programme, make it difficult for the ECB to concentrate stimulus in certain markets or to flexibly vary the size of its intervention.
Schnabel, however, argued that markets send important signals that influence government spending behaviour and once the crisis abates, these market signals should not be suppressed.
“It would probably not be possible to suppress, it’s also not optimal to suppress these signals altogether, let’s say forever,” Schnabel, the head of the ECB‘s market operations said. “We cannot simply transfer the full flexibility of the PEPP to other programmes.”
But she also appeared to soothe fears of ECB indifference, arguing that the ECB has a “strong interest” in preventing fragmentation of financial markets among euro zone members.
On the current economic outlook, Schnabel said the bloc was rebounding quickly, with indicators pointing to rapid growth as economies reopen and services start back up.
“If you look at any of the indicators that are coming in, like the PMIs or other confidence indicators, you see that they are all very strong, very optimistic, and they point towards a strong recovery this year,” Schnabel said.