FRANKFURT (Reuters) -The European Central Bank remains committed to shielding the euro zone economy as the path of the coronavirus pandemic remains uncertain, and authorities should not withdraw support too soon, ECB President Christine Lagarde said on Tuesday.
With the ECB due to discuss the future of its emergency bond purchases next month, some policymakers are calling for the pace of money printing to be slowed in light of falling infections, accelerating vaccination programmes and an economy that is gradually reopening.
But Lagarde told an online event it was “essential that monetary and fiscal support are not withdrawn too soon… As far as the ECB is concerned we will stand by our commitment … to protect Europe’s economy.”
Bond yields have been rising in recent weeks as investors factored in higher inflation expectations and the prospect of smaller purchases from the ECB.
The ECB bought 80 billion euros ($97.7 billion) worth of bonds last month under its Pandemic Emergency Purchase Programme and is due to decide at its June 10 meeting whether to maintain or slow that pace.
Lagarde also urged monetary and fiscal authorities to work “hand in hand” – a refrain that may unnerve some orthodox-minded economists, particularly in cash-rich, inflation-wary Germany.
They are concerned that the ECB may be turning into a source of cheap funding for indebted countries such as Italy, rather than just focusing on keeping prices stable.
That camp was dealt a further blow earlier on Tuesday, when Germany’s top court rejected a complaint against a separate, larger ECB bond-buying scheme.
($1 = 0.8189 euros)
(Reporting By Francesco Canepa; Editing by Catherine Evans and John Stonestreet)
