ECB 'cautious' despite mounting pressure

The European Central Bank (ECB) will delay any amendments to interest rates or changes to its pledge to buy bonds until after the French elections, analysts said ahead of a governors' meeting of the central bank on Thursday.

The pro-euro centrist French presidential candidate Emmanuel Macron celebrated victory in the first round, but despite the scope to reduce monetry stimulus - given that the threat of a run-off between two eurosceptic candidates has been averted - the ECB is unlikely to act until June, the pundits argued.

The eurozone's central bank is under pressure to raise rates, not least from German savers who have long endured rock-bottom yields on their deposits. But the raising of interest rates could yet influence the outcome of the elections, which is concluded on May 7 when Macron faces off against euroskeptic and Front National candidate Marine Le Pen.

The ECB, whose bond-buying program is effectively on auto-pilot until December, remains on course to buy 2.3 trillion euros ($2.5 trillion) worth of bonds and is charging banks for parking excess cash with it overnight in a bid to stimulate lending and, as a consequence, inflation and growth, in the euro area.

The central banks of Portugal and Ireland are running out of government bonds to buy while the Bundesbank's massive purchases of German debt is exacerbating scarcity of that paper.

The ECB has argued time and again that changing the terms of the program to alleviate such issues carries political and legal risk.

This adds weight to the calls for a gradual winding down of the buying program next year, if the recovery in eurozone inflation turns out to be sustainable. 

While the ECB itself refused to comment, a source close to the bank's Governing Council told Reuters "we need to use a lot of caution before making any change."

mds/hg (Reuters, dpa)