Coeure: ECB might extend QE as Visco calls buying open-ended

European Central Bank policy makers Benoit Coeure and Ignazio Visco underlined that their new bond-buying program 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, where they were among a small coterie of Governing Council members who traveled to the Swiss resort after completing an historic monetary-policy decision in Frankfurt the day before. ECB President Mario Draghi pledged to buy 60 billion euros ($68 billion) 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 program 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 percent in December, compared with the ECB’s medium-term inflation goal of just under 2 percent. Prices probably slid 0.5 percent this month from a year earlier, according to a Bloomberg survey before data due on Jan. 30. 


German Opposition

“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.”

Coeure will speak on a panel on Saturday alongside Bank of England Governor Mark Carney and Bank of Japan Governor Haruhiko Kuroda. As a member of the ECB’s six-person Executive Board, he 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 criticized the plan in a German newspaper on Friday. 


Bond Rally

“It is a fact that with the new program, 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.

Finland’s central-bank governor, Erkki Liikanen, told state-owned broadcaster YLE that while he’s “satisfied” with the ECB’s measures, “governments and labor-market organizations must also implement structural reforms which strengthen the economy and create jobs.”

Investors signaled that they welcome the QE program. 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. (Bloomberg)