The European Central Bank will discuss at its June 14 meeting whether to begin to wind down its €2.55 trillion bond-buying program amid signs that headline inflation is moving toward its target, the ECB's chief economist Peter Praet said.
"Signals showing the convergence of inflation towards our aim have been improving, and both the underlying strength in the euro area economy and the fact that such strength is increasingly affecting wage formation supports our confidence that inflation will reach a level of below, but close to, 2% over the medium term," Praet said in a speech in Berlin.
Eurozone headline inflation accelerated to 1.9% in May from 1.2% in April, while core inflation advanced to 1.1% from 0.7%.
"Next week, the Governing Council will have to assess whether progress so far has been sufficient to warrant a gradual unwinding of our net purchases. In making its assessment, it will consider the underlying strength of the euro area economy and the pass-through to wage and price formations," Praet said.
The ECB has said its bond purchases will end once there is a sustained adjustment in inflation toward levels below but close to 2% in the medium term, when it is confident that projected headline inflation is converging on this target, and once it judges that this will be maintained even once QE concludes.
"Once the Governing Council judges that the three criteria have been met, net asset purchases will expire, in line with our guidance," Praet said.
The bond-buying program is set to end in September, but analysts are widely expecting an extension until the end of the year. In April, ECB President Mario Draghi avoided formal talks about winding down the program.
Meanwhile, Jens Weidmann, head of the Deutsche Bundesbank, Germany's central bank, said expectations that the ECB would end its bond-buying this year were "plausible," Reuters reported.
The euro was up 0.32% to $1.1757 as of 5:44 a.m. ET.
