ECB mulls slowing pace of pandemic spending

The European Central Bank is thinking about slowing the speed of its emergency bond purchases, the Financial Times has reported, in what the paper says could develop into a row between "hawks "and "doves" over the best way to recover economically from the COVID-19 pandemic.

The issue came to a head last month in a debate among policymakers about whether the bank should slow the pace of acquisitions, according to newly released minutes from the meeting.

The FT said the more conservative "hawks" wanted the bank, which is known as the ECB, to scale back asset purchasing because of what they saw as a more optimistic economic outlook. The governing council's "doves" wanted it to loosen monetary policy and spend more, to help nations hit hard by the pandemic.

The paper said the policymakers decided to leave things as they are, for now, but revisit the issue of how quickly to spend money through the 1.85-trillion-euro ($2.2-trillion) pandemic emergency purchase program.

Stimulative program

The program, which is known as the PEPP, was launched in March 2020 to counter the risks the pandemic posed to the eurozone, and involves the bank temporarily purchasing private-sector and public-sector securities, to stimulate the economy.

The FT said the issue is likely to be revisited at an ECB gathering this month and be decided in September.

At the moment, the bank is spending around 80 billion euros a month through the PEPP.

The minutes from the last meeting said: "In view of the better outlook for growth and inflation and the associated upside risks, it was… argued that, to provide the same degree of accommodation, asset purchases should be scaled back somewhat."

"Hawks" on the council said maintaining even the current level of expenditure could "hinder structural change in the corporate sector and resource reallocation in the labor market" the FT reported.

"In addition, property price dynamics were accelerating," the minutes said.

Other central banks have been debating whether to continue their pandemic-related stimulus spending and Canada and Australia have already decided to slow the speed of their bond purchases.

Ignazio Visco, the governor of Italy's central bank, told the United States television business news channel CNBC that he thinks it is too soon to scale back the PEPP.

Christine Lagarde, the president of the ECB, told Bloomberg TV that the bank's policy meeting on July 22 should provide additional clarity on the next steps for the PEPP, which is set to remain in place until March 2022.