MNI BRIEF: ECB Must End APP In Coming Months - Makhlouf

The ECB should stop buying bonds under its asset purchase programme in June or July and could return key interest rates to positive territory in early 2023, although the precise path to normalisation is not yet clear, Central Bank of Ireland chief Gabriel Makhlouf said in a speech Thursday, saying that levels of inflation meant policymakers “have reached the point where we on ECB’s Governing Council need to act."

“What is clear is that the era of negative rates is reaching its conclusion,” he said. “What is less clear is the precise path towards normalisation, when exactly rates should start to rise and when they should stop rising. I think it is realistic to expect that the first move in the ECB’s interest rates will happen soon after net asset purchases end and that rates are likely to be in positive territory by early next year.”

Makhlouf's tone was notably less hawkish than recent interventions by Governing Council members Robert Holzmann, Olli Rehn, Francois Villeroy de Galhau, Joachim Nagel, Isabel Schnabel and Madis Muller - though he agreed with ECB president Christine Lagarde’s assertion that the disinflationary dynamics the euro area has experienced over the last decade are unlikely to return.