ECB should keep policy options open regardless of Fed

NUSA DUA, Indonesia (Reuters) – 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 euro zone inflation, the ECB expects to stop adding to its 2.6 trillion euro ($3.0 trillion) pile of bonds at the end of this year and has guided the market to expect a rate hike some time in late 2019.

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 U.S. 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 euro zone 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.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.