European Central Bank (ECB) board member Isabel Schnabel has indicated that the ECB remains distant from restarting large-scale bond purchases aimed at boosting liquidity in the banking system. Speaking on Thursday, Schnabel emphasized that the central bank must first reduce the substantial portfolio of bonds accumulated during years of ultra-loose monetary policy.

Between 2015 and 2022, the ECB carried out extensive quantitative easing, buying trillions of euros in government and corporate bonds to counteract persistently low inflation. Now, the bank is systematically unwinding those holdings in what Schnabel calls a necessary “quantitative normalization” process.

“We will only initiate purchases under the new bond-buying program once the liquidity from our previous monetary policy measures has sufficiently run off,” Schnabel stated, signaling that new large-scale asset purchases are “still far away.”

She added that the focus of any future purchases would primarily be on short-term bonds, helping mitigate potential losses if interest rates rise further.

Before restarting quantitative easing, the ECB plans to reintroduce long-term loans to banks. These loans could be offered through regular tenders with a fixed cash amount and a variable interest rate, with maturities under review. Schnabel noted that in the past, longer-term lending has been reserved for crisis situations such as the eurozone debt crisis and the COVID-19 pandemic.

As the European Central Bank continues to normalize its balance sheet, market watchers remain focused on how its strategy will affect liquidity, interest rates, and the broader eurozone economy.