ECB policymakers contemplate
  • ECB hawks pushing for no APP purchases increase appear ready to compromise
  • They fear doing nothing risks market turbulence
  • ECB intends to bolster APP purchases next year once PEPP ends
  • But there would be limits to size and time of commitment
  • Open-ended increase in APP purchases is highly unlikely
  • ECB to signal unusually high flexibility and optionality instead

It's a given that PEPP purchases will not be extended beyond March next year. However, the debate in the ECB now is centering on what happens next. As mentioned back in September here, a boost to APP purchases is on the cards and that is what policymakers are leaning towards at the moment.

But considering the inflation conundrum, policymakers do not want to give any misguided impressions. Not only that, the hawks are certainly fighting for their own agenda too.

The report also says that any step up in APP purchases from April onwards will be significantly lower than the current combination of APP and PEPP purchases combined.

I don't doubt that. But at the end of the day, QE is still QE. And this isn't going to signify any meaningful end to bond buying as a whole for the ECB.