News ID: 232746
Published: 0800 GMT October 14, 2018

ECB should keep policy options open regardless of Fed

ECB should keep policy options open regardless of Fed
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The European Central Bank should keep its policy options open and not let itself be influenced by the Federal Reserve, ECB policymaker Francois Villeroy de Galhau said on Sunday.

Encouraged by a recovery in eurozone inflation, the ECB expects to stop adding to its €2.6 trillion ($3.0 trillion) pile of bonds at the end of this year and has guided the market to expect a rate hike sometime in late 2019, Reuters wrote.

Villeroy said the ECB would soon decide how to reinvest the proceeds of the bonds that expire next year but should not yet commit beyond that point.

"We should keep our options open about the timing of our reinvestment in the following years," he told a conference on the sidelines of the International Monetary Fund's annual meeting in the Indonesian resort town of Nusa Dua.

The French central bank governor added that rate-setters should wait a little longer to clarify their guidance on interest rates, which currently just says they will stay at their current, rock-bottom level "at least through the summer of 2019".

"As we approach the summer of 2019, the balance will shift in favor of detailing our forward guidance," Villeroy said.

Six rate hikes by the Fed in 1-1/2 years have sent the US dollar rallying against the currencies of fragile emerging economies such as Argentina and Turkey, forcing their central banks to also increase borrowing costs to arrest the slide.

The eurozone has been relatively insulated and Villeroy said the ECB should proceed at its own pace.

"I think the euro area can determine its own course," he said.

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