Pierre Wunsch, head of the Belgian central bank and member of the ECB Governing Council, has called for a reassessment of the European Central Bank's (ECB) policy on the reduction of nearly €1.7 trillion ($1.8 trillion) in bonds, according to his recent interview with Bloomberg TV. Wunsch questioned the ECB's plan to reinvest maturing Pandemic Emergency Purchase Programme (PEPP) portfolio securities through the end of 2024, suggesting a potential cessation of PEPP reinvestments.
The Belgian central bank chief's comments come amid rising Italian bond yields, which have been triggered by the failed bank tax attempt and budget loosening of Giorgia Meloni’s government in Italy. Despite these developments, Wunsch downplayed their influence on the ECB's bond reduction deliberations.
Fitch Ratings, meanwhile, has criticized Italy's financial approach following these events. Concurrently, Gabriel Makhlouf, Irish central bank Governor, pointed out that the ECB is paying close attention to investors' perception of Italy's financial situation.
Despite the surging Italian bond yields, Wunsch advocated for an accelerated reduction in bonds bought during the pandemic, suggesting a need for policy reassessment and potential cessation of PEPP reinvestments. He stressed that these decisions should be made regardless of Italy's increased borrowing costs.
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