The European Central Bank (ECB) could soon start planning an exit from its unprecedented stimulus programme, Executive Board member Sabine Lautenschlaeger said Tuesday, a rare public discussion of ending its asset buying scheme.
A longtime critic of the ECB’s ultra-easy monetary policy, Lautenschlaeger has opposed many of the bank’s past easing measures and now becomes the only board member to publicly advocate an exit, a taboo for ECB President Mario Draghi, who has said that tapering, or winding down the 2.3 trillion euro ($2.5 trillion) programme has not been discussed.
“All preconditions for a stable rise in inflation exist,” Lautenschlaeger, considered one of the top hawks on the rate setting Governing Council, said in a speech. “I am thus optimistic that we can soon turn to the question of an exit.”
But she also noted that a few more positive readings may be needed and the ECB should avoid reacting to a temporary inflation spike.
Acknowledging a firmer inflation outlook, the ECB last month agreed to cut its asset buys by a quarter from April but also extended the scheme until the end of the year, arguing that underlying inflation is still weak and the recovery is fragile.
Lautenschlaeger, who often votes in the minority, said the ECB should not wait until all doubts about the return of inflation have been dispelled because then it risked moving too late.
Having fought the risk of deflation for years, the ECB is now under pressure as higher energy costs feed into other prices, igniting calls for the bank to ease up on the accelerator.
“Loose monetary policy is like a strong medicine for someone who’s very sick,” Lautenschlaeger. “It works, no doubt, but it also has side effects – and some of the unconventional measures have stronger side effects than others.”