According to ECB policymaker Martins Kazaks, the European Central Bank could end its stimulus programme sooner than expected, but it is unlikely to raise its main interest rate in July, as investors predict.
After ECB President Christine Lagarde opened the door to a rate hike and acknowledged mounting inflation risks on Thursday, investors have moved their bets on the bank's first rate hike in more than a decade forward.
However, Kazaks pushed back against market expectations for a July move, arguing that this would entail a complete winding down, or "tapering," of the ECB's bond purchases before then.
"July would imply an extremely and unlikely rapid tapering pace," Kazaks said. "However, it would be too premature to name a specific month at this time."
The ECB has long stated that it will terminate its bond purchases "shortly before" raising its deposit rate from minus 0.5%, and Lagarde and colleagues have just reaffirmed that commitment.
Asset purchases are expected to last until at least October, however sources say the ECB is likely to push that deadline forward at its March 10 meeting.
With Eurozone inflation hitting a new high of 5.1% in January, more than double the ECB's target of 2%, Kazaks were also open to action.
"If we see that inflation remains high and the labour market remains robust or strengthens further, if we see that the economy keeps going, the direction is clear: we may act sooner than we expected previously," Kazaks said.
Kazaks noted that wages, a crucial driver of price growth, had surprisingly failed to rise, but he still saw a growing risk that high inflation will persist in the Eurozone, lessening the need for ECB largesse.
"With the economy recovering, inflation at this level, and the increasing risk of inflation persistence," Kazaks said, "new net asset purchases become less necessary."