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The European Central Bank may need more time to determine its next policy steps as the omicron strain of Covid-19 and new pandemic restrictions weigh on the euro area’s economic recovery, according to Governing Council member Olli Rehn.
Speaking in Helsinki just over a week before a crucial ECB meeting on the future of its stimulus programs, the Finnish central bank chief stressed the importance of clarifying policy makers’ options.
“If that’s not possible when taking decisions now, it may be possible within some weeks,” Rehn said Wednesday. “Sometimes it’s best to win time in making decisions.”
With scientists still assessing the threat posed by omicron, the ECB will discuss plans for its 1.85 trillion-euro ($2.1 trillion) pandemic bond-buying program, known as PEPP, as well as other tools on Dec. 16. Inflation -- currently running at the fastest pace since the euro was founded -- will also be at the heart of the debate.
Rehn said officials will probably be able to decide next week on whether to halt net purchases under PEPP as scheduled at the end of March. But he was less keen on cementing a path for the ECB’s older asset-purchase program and -- as some of his colleagues have -- stressed the need to maintain some room to maneuver amid the current uncertainty.
“My stance is to continue the normal purchase program and alongside keep PEPP in the toolbox at least,” Rehn said. “If it looks like the situation is getting worse again, PEPP is flexible and can be used effectively to grease the monetary policy transmission mechanism.”
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