ECB’s Muller: Not obvious ECB should increase APP purchase volumes beyond March given high inflation

European Central Bank governing council member Madis Muller said on Tuesday that it is not obvious that the bank should be adding to its Asset Purchase Programme purchase volumes beyond March in light of high inflation and the uncertainty outlook. It would not be wise to commit to any specific level of purchases for more than a few quarters ahead, he added.

Muller said that inflation will take longer to come down than expected and risks remain tilted to the upside, echoing the tone of other concerned ECB policymakers. Eurozone inflation may be above target next year, he added (a point which fellow ECB member Holzmann recently made) and that longer-term projections may need to be raised. Finally, Holzman said that each new wave of the pandemic has a lower impact on the economy and that the medium-term growth outlook for the Eurozone is broadly unchanged. 

Market Reaction

The hawkish tone of remarks from ECB’s Muller have been unable to give the euro a lift in recent trade, with the currency continuing to trade close to session lows in the 1.1250 area.  

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