New restrictions in areas of the Eurozone to combat record Covid-19 infections are unlikely to disrupt the planned wind-down of monetary stimulus, said European Central Bank Governing Council member Klaas Knot.
The measures "will surely have a moderating effect on economic activity," Knot said, "but the impact on inflation will be more ambiguous, because it may also reinforce some of our concerns about supply constraints."
Knot added, "I don't think that will have an influence on our intention to wind down the pandemic emergency purchasing program. After all, it has already achieved its dual objectives."
Knot spoke as the ECB prepares for a major meeting in December to decide on post-crisis stimulus policies. The central bank's biggest monthly bond purchases, worth 1.85 trillion euros ($2.1 trillion), are set to expire in March.
In a separate interview, ECB Executive Board member Isabel Schnabel said that the plan to let emergency purchases expire as scheduled "is still valid."
Officials must also decide whether to increase regular asset purchases to ease the transition and, if so, how much of the flexibility that characterised their reaction to the pandemic should be retained to address fragmentation on sovereign-bond markets.
The emergency program, known as PEPP, "will not end in March," according to Knot. "Only the net asset purchases will end," he explained. "We have a major reinvestment challenge ahead of us, and we've already committed to reinvesting at least until December 2023."
PEPP's flexibility "has served us quite well," Knot said. "In order to avoid undue fragmentation, we'll have to shift that flexibility to the reinvestment phase as well," he said.