ECB executive board member Benoit Coeure speaks during a session on the final day of the World Economic Forum (WEF) in Davos and (below)Ignazio Visco, governor of the Bank of Italy, pauses during a session at the WEF. Both the officials underlined that their new ECB bond-buying programme will be extended if it doesn’t show results.
Bloomberg/Frankfurt
European Central Bank policy makers Benoit Coeure and Ignazio Visco underlined that their new bond-buying programme will be extended if it doesn’t show results.
“If we haven’t achieved what we want to achieve,” said Coeure, the ECB’s head of market operations, “then we’ll have to do more, or we have to do it for longer.” Visco, the Italian central-bank governor, said earlier on Friday that “we are open-ended” about asset purchases.
Both men spoke in Bloomberg Television interviews in Davos, Switzerland, where they were among a small coterie of Governing Council members who travelled to the Swiss resort after completing an historic monetary-policy decision in Frankfurt. ECB President Mario Draghi pledged to buy €60bn ($68bn) a month of assets including government bonds through September 2016, while also committing to do so until officials see “a sustained adjustment in the path of inflation.”
The ECB’s calculations show the programme will add 0.4 percentage point to inflation in 2015 and 0.3 percentage point in 2016, according to a euro-area official. Consumer prices fell an annual 0.2% in December, compared with the ECB’s medium-term inflation goal of just under 2%. Prices probably slid 0.5% this month from a year earlier, according to a Bloomberg survey before data due on January 30.
“If we see that there are difficulties in achieving this target that we have, we have to continue,” Coeure told Bloomberg’s Francine Lacqua and Guy Johnson at the World Economic Forum. “It’s intended to last until September 2016 and then we’ll reassess and we’ll see if it is enough or if it is not enough.”
As a member of the ECB’s six-person Executive Board, Coeure helped formulate the initial quantitative-easing proposal, which he said was created to win as much support as possible in the 25-member Governing Council.
“We’ve been able to design it in a way that brings as many people as possible on board,” Coeure said. “We’re happy.”
Five members took issue with the plan, with Bundesbank President Jens Weidmann and the German member of the Executive Board, Sabine Lautenschlaeger, voicing the strongest disagreements, according to euro-area central bank officials. Weidmann criticised the plan in a German newspaper on Friday.
“It is a fact that with the new programme, central banks in the Eurosystem become the largest creditors of euro-area states,” he said in an interview published in Bild. “Political pressure to keep the interest burden on finance ministries permanently low” could increase, he said.
Bank of England Governor Mark Carney said during a Saturday panel at the WEF that low interest rates and QE could prompt “excessive risk taking.” BlackRock chief executive officer Laurence Fink, who moderated the panel, said QE “creates in some markets some distortions.”
ECB Executive Board member Yves Mersch said in an interview with Neue Osnabruecker Zeitung published on Saturday that German concerns about bond purchases have been addressed “even if this can possibly only be seen in the fine print.”
Finland’s central-bank governor, Erkki Liikanen, told state-owned broadcaster YLE that while he’s “satisfied” with the ECB’s measures, “governments and labour-market organisations must also implement structural reforms which strengthen the economy and create jobs.”
Investors signalled that they welcome the QE programme. The Stoxx Europe 600 Index finished the week at the highest level in more than seven years and government bonds rallied around the world. The euro fell to the weakest against the dollar in more than 11 years.
