ECB chief economist sees small impact from bond unwind

FRANKFURT: The European Central Bank's reduction of its massive government debt holdings could have just a modest impact on growth and inflation, chief economist Philip Lane said on Thursday.

"Our models suggest that reducing our asset portfolio by a normalised cumulative 500-billion-euro ... over 12 quarters contributes to lowering inflation by 0.15 percentage points and output by 0.2 percentage points," Lane said.

The ECB plans to cut its debt pile by 15 billion euros a month from March but this figure will be revisited and some policymakers have already called for quicker pace from the third quarter.


In his speech, Lane said the ECB's policy tightening, including a string of rate hikes since last summer, was already lowering inflation but much of its effect was "still in the pipeline".

"Inflation is estimated to be around 1.2 percentage points lower in 2023 and 1.8 percentage points lower in 2024 as a result of the tightening, while the negative impact on real GDP growth is estimated to be around 1.5 percentage points on average over the three years," he said.