Vitas Vasiliauskas ECB council member sees end to bond-buying program this year

Lithuania’s central banker tells Handelsblatt that he expects the European Central Bank’s economic stimulus will be phased out by the end of 2018.
It's time to end the program. Picture source: Reuters

It’s by no means a done deal, but Vitas Vasiliauskas sounds pretty confident. The head of Lithuania’s central bank said he expects the European Central Bank to wind down its asset purchasing program by the end of this year.

Mr. Vasiliauskas, a member of the ECB’s governing council, told Handelsblatt that a final decision would naturally be based on the path of the euro zone’s economy, but “if we go by the current information, it is likely in my view that we will end the purchases and have a transition phase until the end of the year.”

The ECB is currently buying €30 billion ($35.6 billion) worth of government and corporate bonds every month, but the program is set to end in September. The ECB has yet to say what will happen after that month. Mario Draghi, the ECB’s president, offered few clues at the central bank’s last meeting, acknowledging that the ECB “didn’t discuss monetary policy per se” and focused on the economic outlook instead.

Markets expect an announcement in June or July on whether the program will be extended beyond September. Mr. Vasiliauskas acknowledged there was still “uncertainty,” stemming from a tariff dispute with the United States and a drop in some of the euro zone’s economic indicators. Mr. Vasiliauskas said he expected the dip to be temporary. More information would be on hand in June, he said, but added that the likeliest outcome is still for the purchases to be wound down to zero by the end of 2018.

When the ECB will start raising interest rates is another matter. The prevailing market opinion is that interest rates could rise as early as mid-2019. Mr. Vasiliauskas said he could imagine it being more than a year after the end of bond purchases before the ECB starts raising rates — a similar timeline as the US Federal Reserve when it started normalizing its policies back in 2015.

Jan Mallien covers monetary policy for Handelsblatt and is based in Frankfurt. Helmut Steuer is Handelsblatt’s Scandinavia correspondent. Christopher Cermak adapted this story for Handelsblatt Global. To contact the authors: [email protected] and [email protected]