The European Central Bank must halt its bond-buying programme because it has done as much as it can to help power economic growth, the Dutch central bank governor said, sparking a market reaction on Monday.
‘It must be stopped as soon as possible, because the bond-buying programme, if we look at it realistically, has done all that we could expect of it,’ Klaas Knot, who sits on the European Central Bank’s governing council, told Dutch TV news show ‘Buitenhof’ in an interview.
His remarks caused an immediate price fall in European government bond markets, as investors wondered whether Knot’s remarks should be read as a sign that European Central Bank support for bonds will end soon.   
Last week, the ECB left interest rates at historic lows and held fast to plans to buy 30 billion euros ($37.2 billion) of government and corporate bonds per month until September, offering no hints about when it might step back from the mammoth stimulus programme.
The bank’s governors, led by President Mario Draghi, agreed at the talks in Frankfurt that they would even consider increasing or lengthening the programme, known as quantitative easing (QE).
However Knot insisted that ‘there is no reason to continue with this programme’.
The ECB commitment remains up to September ‘but after that, we should phase it out as quickly as possible. And that is what the market is also expecting,’ he added.
‘I think we should be clear in what we say, and I think there is enough evidence’ to halt it.’
The ECB’s governing council is split into two opposing camps, said Axel Botte, bond strategist at Natixis AM.
One, led by chief economist Peter Praet, wants a withdrawal from the programme only when inflation is back on target, Knot said.
But ‘more and more ECB members want a firm commitment to, and an early message on, the end of quantitative easing, most probably in September,’ he told AFP.
Draghi announced in January 2015 that the ECB would expand its interventions in financial markets with mass bond-buying.
Ending the programme would be a major policy shift that could herald the beginning of the end of the cheap money era.
And charting a way out of QE has been made more complicated by the recent strength of the euro, which has gained more than 15 percent against the dollar over the past year, currently hovering above $1.23.
The yield on the 10-year benchmark German government bond rose to 0.694 percent late Monday from 0.629 Friday as investors sold bonds, while the French bellwether bond yielded 0.970 percent, against 0.913 Friday.