ECB’s Villeroy points to ‘pragmatic approach’ over QE in March

Governor of the Bank of France de Galhau attends a press conference after the Franco-German Financial Council meeting in Berlin

By Angus Berwick and Jesús Aguado

MADRID (Reuters) – The European Central Bank will not abruptly stop its bond-buying program but nor will it extend it indefinitely beyond its planned end in March 2017, governing council member Francois Villeroy said on Monday, pointing to a “pragmatic approach.”

Bank of France Governor Villeroy said the quantitative easing program would go on as announced until March but the ECB would have to deal beyond this date with new uncertainties created by the Brexit vote and Donald Trump’s election victory in the United States.

He said the ECB had many options open regarding the size and duration of the instruments it can use. But these excluded “either a sudden stop of its contribution to our accommodative policy in March, or the continuation of the same contribution forever,” he said.

Villeroy told a conference in Madrid: “I am fully confident that in our next monetary meetings, in the coming months, we will decide in a pragmatic approach about the best evolution after March of all our available tools: QE, TLTRO and forward guidance on interest rates.”

QE refers to the program of using newly created money to buy bonds, while TLTROs, or targeted longer-term refinancing operations, provide banks with financing for up to four years on attractive terms designed to stimulate lending to the real economy.

Villeroy said that until March the ECB would continue “exactly as we said we would.”

The bank has said it will buy assets worth 80 billion euros ($85.90 billion) per month until March as it aims to boost inflation from very low levels, and it will debate in December whether to extend the program.

Villeroy said he expected deep changes to U.S. economic policy under President-elect Trump, who has pledged to significantly boost infrastructure spending and promised to pursue an “America first” trade policy.

Villeroy also added his voice to other European policymakers on the European Union’s stance to Britain’s planned exit from the bloc, saying access to the EU single market went hand in hand with “strict acceptance” of all its rules, which could not be cherry-picked.

Faced with such challenges, Villeroy said monetary policy should be a “yardstick of stability,” although it should be accompanied by a greater focus on fostering a European economic union.

(Editing by Julien Toyer and Mark Trevelyan)