MNI POLICY: ECB May Not Delay Hikes: Bundesbank's Mauderer

By Luke Heighton

     FRANKFURT (MNI) - The ECB may not need to delay its first hike to key

interest rates, Bundesbank Executive Board member Sabine Mauderer said Friday,

as "insecure phases" give way to "ensured" euro-area growth.

     Mauderer also said the ECB would have to decide whether to issue another

round of TLTROs and whether to continue to provide banks with unlimited cash

through its regular tender operations.

     Here are key points from her speech in Hamburg:

     -- She cautioned against accepting market assumptions that the ECB's

timetable for key interest rate hikes has been delayed, and said that at its

meeting in January, "the Governing Council of the ECB continued to be confident

that underlying inflation in the euro area would gradually rise and that

inflation would reach its target level of just under 2% over the medium term."

     --Mauderer cited favourable financing conditions, continued employment

growth and increased wage growth as factors that "should ensure continued growth

in the euro area," but asserted: "The exact monetary policy roadmap is dependent

on future economic data, especially on the inflation outlook."

     --"Insecure phases are part of monetary policy, and they should not throw

us off track", Mauderer said. "In any case, this process of normalization is

likely to take several years". It is therefore "all the more advisable not to

waste time unnecessarily," she added.

     --The ECB's stated intention to continue reinvestments well beyond the

first increase in key interest rates makes it clear that the first rate hike

should come before any reduction in the ECB's balance sheet. The ECB will also

have to decide in 2019 whether or not to continue providing banks with unlimited

0% cash in its one-week and three-month full allotment tender operations, due to

expire in 2020.

     --Regarding targeted longer-term refinancing operations, Mauderer said it

would be up to the ECB's Governing Council to decide "whether such transactions

are still necessary from a monetary policy perspective and, if so, in what form.

By and large, it will be about how the refinancing of the banks should look in

the future."

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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