This need for policy optionality has implications for the transition out of the Pandemic Emergency Purchase Program, the PEPP, which is likely to come to an end in March 2022. Here, we face two challenges related to the PEPP’s dual purpose. First, there’s the PEPP’s monetary stance role. The program was designed in part to counter the downward impact of the pandemic on inflation.
With the pre-pandemic inflation outlook restored, and with upside inflation risks being prominent, this goal has been reached. A key question going forward is whether we will need a higher purchase volume under our regular Asset Purchase Program to facilitate the transition out of the PEPP and to further support inflation dynamics. To me, this is not clear-cut.