ECB says contested QE program already helping eurozone recovery
Print Edition
THE European Central Bank yesterday said it is increasingly confident that its controversial bond purchase program is helping boost the eurozone’s economic recovery, even as a top official expressed doubts about its effectiveness.
In the minutes of the governing council’s meeting on March 4 and 5 released yesterday, the ECB said “members generally shared the assessment that significant positive effects ... could already be seen” from the new bond purchase program known as quantitative easing.
And that was leading to “prudent optimism” about the recovery outlook, showed the minutes.
On January 22, the ECB announced it would embark on a QE policy, used by other central banks, and make sovereign bond purchases to boost the worryingly low level of inflation in the eurozone.
Under the program, the ECB aims to buy 1.14 trillion euros (US$1.2 trillion) worth of bonds between now and September 2016 at a rate of 60 billion euros per month. And the latest data showed it had bought a total 41.02 billion euros worth of bonds by March 27.
However, some prominent ECB members — notably the head of the German central bank or Bundesbank Jens Weidmann and ECB executive board member Sabine Lautenschlaeger — have repeatedly expressed doubts about the need and impact of such a program.
Lautenschlaeger told a German magazine yesterday that she had “doubts whether the economic effects of the purchase program will reach the desired magnitude.”
And she warned the current very low level of interest rates could lead to the formation of asset price bubbles.
Before joining the ECB’s executive board, Lautenschlaeger was vice president of the German central bank and she shares the same skepticism as Weidmann.
Nevertheless, at the governing council’s last policy meeting in Nicosia, Cyprus, in March, there appeared to be agreement that QE was indeed helping to ease financial market conditions and the cost of external finance for companies, the minutes showed.
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