Inflation in the European Monetary Union is so high that it could exceed the long-term outlook of the European Central Bank. There is no reason for the ECB to extend the government bond-buying programme, which ends next year in March.
Madis Müller, governor of the Central Bank of Estonia, who is also a member of the executive board of the European Central Bank, is convinced of this. The pandemic rescue programme (PEPP), launched by the ECB as a response to the economic crisis triggered by the coronavirus pandemic, is due to end in March 2022. Under its framework, the ECB has allocated €1.85 trillion to help eurozone economies.
While previous programmes the ECB triggered after the Great Recessions of 2008 and 2009 more or less did not lead to the desired increase in inflation to the target 2 percent level, at present inflation is already in A eurozone so high that few will propose that quantitative easing continue.
“The pandemic rescue program may indeed end as of March 31. I can’t imagine that we would extend it,” Madis Müller said in an interview with Reuters agency. Next to that, however, the standard purchase of assets by the European Central Bank of 20 billion euros per month is still running. That one is likely to continue.
