ECB denies plans for Fed-style bond programme

The European Central Bank denied a German newspaper report today that it was considering launching a new bond purchase programme under which it would buy debt of all 17 euro zone countries.

Sueddeutsche Zeitung said there were discussions at working group level at the ECB about buying bonds of all euro zone governments according to their share of gross domestic product in the currency area.

That would add a new element to the ECB’s stimulus programme akin to the quantitative easing adopted by the US Federal Reserve, the newspaper said.

“The article is wrong,” an ECB spokesman said.

ECB president Mario Draghi said in April the bank was looking at its options “from a 360-degree perspective”.

But ECB executive board member Joerg Asmussen said this referred to ways of reviving lending to the real economy.

“The thinking of the ECB in a 360-degree perspective relates to the issue of supporting, within our mandate, the credit supply to the real economy, especially to SMEs, to nothing else,” Mr Asmussen said. “Stories that claim otherwise are not correct.”

The ECB holds a policy meeting next Thursday, when it is expected to keep its main interest rate on hold at a record low of 0.5 per cent.

Mr Draghi, and other ECB policymakers, said earlier this week an exit from the bank’s exceptional monetary policy measures remains “distant”.

Their comments stand in contrast to those made last week by Federal Reserve chairman Ben Bernanke, who said the US economy was expanding strongly enough for the central bank to begin slowing the pace of its bond-buying stimulus later this year.

Reuters