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Lagarde: No Point Not Accelerating APP Runoff, But Retaining Optionality

Q: Do you plan to reduce APP to zero eventually? And is this part of a compromise to placate those who wanted a 50bp hike?
  • A: Today's decision specifically says "we expect". If we go to APP with zero size it would take 12-15 years given maturities. Retained a little optionality to start in July as partial reinvestment has been running very smoothly - so no point in not accelerating the move. Complements policy rate, reduces large balance sheet etc.
  • Discussed "tilting approach" to privilege corporates with good environmental footprint. If a move to full runoff there would be no tilting. So jury is out how to take into account lower emissions.
  • Was it a deal? No. A general view it was the right move. Some might have preferred to wait until June to announce. But thought it was better to announce now given predictability, but retaining a little bit of optionality on the side.

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