ECB sources: Policymakers see change at March meeting if inflation doesn't ease - Reuters

European Central Bank policymakers see a policy change at the March meeting if inflation does ease, said sources speaking to Reuters. The sources said that policymakers see a faster pace of tapering of the Asset Purchase Programme (APP) as its first point of call to fight higher inflation. According to the ECB's current policy, the APP will run at a rate of EUR 40B/month in Q2, EUR 30B/month in Q3 and then EUR 20B/month indefinitely from Q4. The sources added that a sizeable minority of ECB policymakers wanted to change policy at Thursday's meeting. 

The latest sources speaking to Reuters dovetail with ECB sources who recently spoke to Bloomberg, who also said that ECB policymakers are prepared for a policy change. The sources speaking to Bloomberg added that the bank had reportedly agreed it sensible to no longer rule out a 2022 rate hike, which likely explains ECB President Christine Lagarde's refusal to reiteration her prior assertion that a 2022 hike was unlikely at Thursday's press conference. The Bloomberg sources said that ending the APP in Q3 was a possibility, though no decision had yet been made on any policy shift. 

Market Reaction

The latest Reuters and Bloomberg sources continue to pump speculation about an earlier move to tighten policy by the ECB appears to be supporting the euro against its major G10 counterparts.