MNI BRIEF: END APP In Early Q3, But Hike With Caution - ECB VP

Net bond buys under the ECB’s asset purchase programme should end early in the third quarter, with a first interest rate hike “some time after that”, vice president Luis de Guindos said in a speech Thursday, as he warned that monetary policy normalisation needs to proceed gradually and cautiously in order for policymakers to observe the impact of shifts in financing conditions and the erosion of purchasing on activity and inflation dynamics.

“Despite the current uncertainty, financial markets have, so far, remained relatively calm,” he said. “If stress conditions arise, we will deploy flexibility to ensure that monetary policy is transmitted smoothly across the euro area, as we did to good effect during the height of the pandemic.” (see MNI SOURCES 2: ECB Mulls Crisis Tool As Officials Debate Spread).