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European Central Bank policymakers disagree on whether to set a definitive end-date for their money-printing program when they meet in October, raising the chance that they will keep open at least the option of prolonging it again, six sources told Reuters.
A stubbornly strong euro, with its dampening effect on inflation, is driving a rift among ECB policymakers, the sources on the ECB's Governing Council with direct knowledge of its thinking said.
The split is between 'hawks' -- led by richer, northern countries such as Germany -- who are ready to wind down the 2.3 trillion euros bond-purchase program and 'doves' who simply want to reduce its monthly pace, the sources said.
This is raising the likelihood that they will seek a compromise solution on October 26, whereby any end-date for purchases would not be set in stone, or that they will put off part of the decision until December, the sources added.
The main point of contention is the euro's continued appreciation against major currencies, which is threatening to curb inflation in the euro zone by making its imports cheaper and exports dearer.
The ECB declined to comment. The sources noted that no decision had been made and the debate remained open.
Hawks see the currency's strength as testament to the euro zone's strong economic growth, while doves fear it reflects weakness in the United States and Britain, two of the bloc's main economic partners, and fear any significant surge above $1.20, a high set earlier this month, the sources said.
"The strength of the euro is the number one problem," one of the sources said.
ECB rate-setters were comforted by last week's euro zone wage data, and they will be looking at more indicators such as prices and sentiment, until their Oct. 26 meeting to gauge whether inflation is gradually heading towards the ECB's target of almost 2 percent.
But there are factors beyond their control.
The prospect of British interest rates rising for the first time in 10 years is giving the ECB some support by boosting the pound against the euro.
On the other hand, several policymakers stressed their uncertainty over whether Donald Trump's U.S. administration will be able to deliver on its pledge to boost the world's largest economy.
This, combined with the massive storms that have hit the United States, was threatening to delay the Federal Reserve's plans for further rate increases and putting a cap on the dollar exchange rate against the euro.
"The main source of uncertainty has to do with U.S. economic policy: to what extent will they be able to deliver," another source said.
In this context, some policymakers were inclined to err on the side of caution and retain the ability to prolong bond purchases again next year if needed.
This could be done by keeping parts of the ECB's long-standing policy message, which says the buys can be extended and expanded if needed to support inflation, the sources said.
To keep options open, ECB President Mario Draghi and other policymakers have been talking of a "recalibration" of the program, rather than "tapering" - the term used by the Fed when it wound down its own quantitative easing (QE) scheme in 2013.
"Recalibration is not tapering, it's open ended," another source said.
In addition, the ECB could push out expectations for its first rate hike, which it has said won't happen before purchases end, by spreading out its buys over a longer period of time, two sources said.
As the ECB is likely to run out of eligible government bonds to buy in some countries, this could be partly achieved by deviating from its pre-set national quotas and buying more corporate bonds, the sources added.
Others, however, were more confident about the ability of the euro zone's economy to hold up without the bond purchases and were still hoping to set an end-date for them, even if that means waiting for the Dec 14 meeting for a decision.
They were stressing the diminishing returns of the money printing scheme and its growing side effects in inflating financial and property prices.
"If the data confirms (the recovery in inflation), we should put an end-date on the program," a source said.
Sources had told Reuters earlier this month that two scenarios discussed by rate-setters at the latest meeting involved buying bonds until June or September at a pace of 40 or 20 billion euro per month, down from the current 60 billion euros.