ECB considering three approaches to QE: Dutch paper

Tue Jan 6, 2015 5:22am EST
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article
[-] Text [+]

AMSTERDAM (Reuters) - The European Central Bank is considering three possible options for buying government bonds ahead of its Jan. 22 policy meeting, Dutch newspaper Het Financieele Dagblad reported on Tuesday, citing unnamed sources.

As fears grow that cheaper oil will tip the euro zone into deflation, speculation is rife that the ECB will unveil plans for mass purchases of euro zone government bonds with new money, a policy known as quantitative easing, as soon as this month.

According to the paper, one option officials are considering is to pump liquidity into the financial system by having the ECB itself buy government bonds in a quantity proportionate to the given member state's shareholding in the central bank.

A second option is for the ECB to buy only triple-A rated government bonds, driving their yields down to zero or into negative territory. The hope is that this would push investors into buying riskier sovereign and corporate debt.

The third option is similar to the first, but national central banks would do the buying, meaning that the risk would "in principle" remain with the country in question, the paper said.

The ECB declined to comment on the report although it appeared to be consistent with comments made by ECB chief economist Peter Praet to a German newspaper last week.

(Reporting by Thomas Escritt; Editing by Catherine Evans)

 
The European Central bank (ECB) headquarters are pictured in Frankfurt in this September 11, 2014 file photo.  REUTERS/Ralph Orlowski/Files