Snabel: The ECB will continue to have a significant presence in the Greek bond market

The European Central Bank will continue to buy Greek bonds under the emergency pandemic program (PEPP) after March 2022, said Isabel Snabel, a member of the ECB’s Executive Committee, in an interview with Bloomberg.

“Greece is benefiting greatly from the markets with PEPP. In the future, there will continue to be a significant market presence with PEPP due to reinvestment. It will be discussed whether this is enough,” said Snabel ECB in December for its monetary policy in 2022.

Snabel clarified that what is expected to be completed next March is not PEPP, but the ECB’s net bonds through this program (ie the new markets will correspond to the bond maturities that the central bank has in its portfolio). “PEPP will not disappear when net bond markets are zeroed. Sometimes people talk about ending PEPP. PEPP is not going to end in March. That may be true for net markets, but not for PEPP itself.” .

Shanbel stressed the success of PEPP, thanks to its flexibility in bond markets, adding that “it is important to maintain some flexibility to deal with market fragmentation”.

However, he noted that over time, the benefits of bond markets are waning and should be replaced by other means. “On the one hand, there are declining yields on bond markets and, on the other hand, there are growing side effects,” he said. our future policy “.

Regarding inflation, the ECB official noted that the risks are upward. “It makes sense to assume that inflation will fall below the 2% target in the medium term. However, the risks are upward,” he said. “Uncertainty about the pace and extent of the reduction (of inflation) has increased and we need to take it into account,” he added.

Snabel downgraded the risk for the eurozone recovery due to the new outbreak of the coronavirus and the restrictive measures taken by some countries, saying that they will only slow down in the short term, especially in the services sector.

SOURCE: AMPE