By Balazs Koranyi and Francesco Canepa
WASHINGTON/FRANKFURT (Reuters) – European Central Bank policymakers discussed earlier this month a detailed timeline for running down a 3.3 billion euro bond portfolio and envisioned the start of quantitative tightening sometime in the second quarter of 2023, sources told Reuters.
The ECB could already tweak its language on reinvestments at its October meeting and then could provide a detailed plan possibly in December but more likely in February, according to three sources who spoke on condition of anonymity.
The ECB is sitting on 3.3 billion euros of debt in its Asset Purchase Programme and has so far said that all cash maturing in this scheme would be reinvested for an extended period of time beyond the first interest rate hike.
With rate increases already underway, reinvestments will also need to come to a close. A seminar presentation at the central bank’s Cyprus meeting saw an end to full reinvestments in the second quarter of next year, with some policymakers mentioning earlier dates and others advocating June.
The debt pile would be run down by not reinvesting all cash from maturing debt rather than outright sales.
Policy hawks, normally advocates of tighter policy, also appeared to be on board with this plan, the sources said, as they are prioritising rate hikes and saw the balance sheet question as a secondary issue.
No decision on this timeline has been taken and the sources said there could be changes. The discussions were in an early stage and the presentation was not a policy proposal.
An ECB spokesman declined to comment.
(Reporting by Balazs Koranyi; Editing by Paul Simao)
