ECB must end bond reinvestments when job is done, says Bundesbank president – Reuters

Joachim Nagel, chairman of Germany’s Federal Reserve Bundesbank poses for a photo in front of wallpaper showing gold bars in a vault during a media tour at the Bundesbank headquarters in Frankfurt September 16, 2022. REUTERS/Heiko Becker

LUCERNE, Switzerland, Sept 23 (Reuters) – The European Central Bank must keep raising interest rates and is also expected to halt bond purchases when they reach their target, Bundesbank President Joachim said on Friday. Nagel.

With inflation in the eurozone approaching 10%, the ECB has raised rates at the fastest pace on record in recent months and promised further hikes next year, hoping to stem the rapid growth of price to put down roots.

Nagel backed those plans in a speech, but also expressed support for rolling back some of the unconventional measures, such as replacing maturing bonds with new ones.

Although the ECB is not buying new debt, it continues to reinvest the billions of euros maturing each month into its 5 trillion euros ($4.86 trillion) of bonds.

“I think it’s important that we quickly end our special measures when they have done their job,” Nagel told a lecture at the University of Lucerne, Switzerland.

Reinvestments in a €3.3 trillion asset purchase program are set to last indefinitely, but a growing number of policymakers want to cut those holdings and a debate over when some papers expire is expected to begin next month. Read more

Nagel did not comment on the size of a rate hike in October, but said rates need to rise even if it dampens growth.

“Combating inflation comes with burdens,” he said. “It is likely to temporarily dampen growth.”

“But doing nothing and letting things take their course is not an option,” he said. “Inflation eats away at wealth…and hits the weakest the hardest.”

($1 = 1.0284 euros)

Reporting by John Revill, writing by Balazs Koranyi, editing by Susan Fenton

Our standards: The Thomson Reuters Trust Principles.