Most notable hawk in the European Central Bank’s (ECB) governing council and the chief of German central bank Jens Weidmann maintained his sharp criticism of the ECB’s monetary policy as usual; however, he was ready to provide the assurance that the central bank would not end the quantitative easing program all of a sudden. In December last year, the European Central Bank (ECB) unveiled a fresh new package of stimulus which includes buying of debt below the ECB deposit rate which is currently at -0.4 percent, and additional bond purchases of €540 billion until December this year.
However, the recent sharp rise in both actual inflation and inflation expectations has led to the speculation that the ECB might end its stimulus by rolling back on its December commitments. Many in the market feared that such a move could disrupt the bond markets in the Eurozone and could lead to sharp rise in the interest rates. While Mr. Weidmann’s comments would ease some of those concerns, it is quite clear that the ECB is unlikely to dive further into easing and the very next action would be in the opposite but the question that remains is – how fast?