ECB Eyes Extending Bond-Buying Program if War Crashes Economy to “Deep Recession”

The European Central Bank would consider extending its stimulus program beyond this summer if the euro-zone falls into a “deep-recession” amid conflict in Ukraine, ECB board member Isabel Schnabel said on Thursday.

The ECB earlier this month said it would end its bond-buying program this summer and raise interest rate for the first time in over a decade some time after that to tame euro-zones inflation down.

Among six other board members of ECB, Schnabel is the most hawkish said the central bank had “left the door ajar” in case events took a turn for the worse for the euro zone, which is highly dependent on Russian gas and other raw materials.

“If we now fall into a deep recession due to the Ukraine crisis, we’ll have to rethink that,” she told a German web show.

“Otherwise, we’ll end the bond purchases in the third quarter and as soon as we’ve done that we can raise rates at any time depending on how inflation develops.”

Estonian central bank governor Madis Mueller, another hawkish board member said in an interview that ECB would only extend its asset purchase program if there was “a dramatic shift” in the inflation outlook.

The ECB expects the euro zone’s economy to expand by 3.7% this year and would still grow even if stricter sanctions were imposed on Russia or supply dried up and financial markets seized up. ECB sees inflation above or at 2% target this year and the following year under any scenario.