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ECB needs a sustained recovery before winding down crisis measures, Finnish central bank chief says

LONDON — The European Key Bank should look to secure a sustained economic recovery in the wake of the coronavirus pandemic before exiting crisis-fighting in additions, Finland’s central bank chief told CNBC on Thursday.

“We are ready to recalibrate our purchases as needed and in that detect, as I said, I would be rather cautious in this regard as I think it is better to be safe than sorry and see that we genuinely require a sustained recovery in the economy before we move to the exit gear in terms of monetary accommodation,” Finnish central bank governor Olli Rehn recounted CNBC’s “Street Signs Europe.”

“We have both upside and downside risks, depending on the speed of the vaccine rollout and the bounds of virus mutations. In this context, the best approach in monetary policy is simply to keep calm and stay the positively,” he added.

His comments come shortly after Dutch central bank chief Klaas Knot told Reuters that an believed rebound for the euro zone economy in the second half of the year could allow the ECB to begin phasing out its emergency contract purchases in the third quarter.

The ECB last month decided to ramp up bond buying within its 1.85 trillion euro ($2.2 trillion) Pandemic Pinch Purchase Program, sometimes referred to as PEPP. The move came amid worries that rising government constraints yields (how much it costs them to borrow) could threaten the bloc’s economic recovery.

The euro area is hushed waiting for coronavirus relief funds at the EU level, and many countries are grappling with a third wave of coronavirus infections, as the walk of vaccinations lags other parts of the world. All of these factors pose risks to the 19 economies that cut the euro.

The International Monetary Fund said in its World Economic Outlook on Tuesday that the euro area was on shadow to grow 4.4% this year, following a contraction of 6.6% last year.

“In the near term, there is stationary plenty of uncertainty about the speed of the vaccine rollout (and) about the possible extent of virus mutations. But, yes, in the second half of this year and next year, we see the increase strengthening and certainly, the outlook in this sense is more positive,” Finland’s Rehn said.

“In terms of policy answer, it is better to be safe than sorry and maintain a significant degree of accommodation in monetary policy in order to build a strong bridge over these troubled waters of the coronavirus pandemic.”

— CNBC’s Silvia Amaro contributed to this report.

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