ECB divided as Trichet hints at plan to print money
By Sean O'Grady, Economics Editor
Friday, 3 April 2009
The President of the European Central Bank, Jean-Claude Trichet, has opened the door to the ECB following the Bank of England and the US Federal Reserve into a policy of "quantitative easing" or printing money.
Although the ECB Council disappointed markets by cutting rates by a less-than-expected quarter percentage point, to 1.25 per cent, focus centred on M. Trichet's remarks on the possibility of "unconventional measures" when rates eventually do find a floor, which he suggested would be relatively soon.
M. Trichet said during the regular press conference that follows every ECB decision that "I would say very candidly as regarding the main policy rate it is not the lowest limit. I do not exclude that we could in a very measured way go down from the present level". He said the ECB's Governing Council would decide whether to take further "non-standard" steps in its monetary policy at its next policy meeting in May. "It's an important message that I tell you that the next decision-making rendezvous, we will tell you what has been decided for the non-standard measures."
The hints on quantitative easing will have been welcome to the Prime Minister and President Barack Obama as they have tried to persuade leading eurozone powers such as Germany and France of the need for a more comprehensive macroeconomic stimulus to their economies. The euro jumped against the dollar on the news, falling back in later trading as scant details emerged of what might be proposed. M. Trichet said the ECB is looking at "optimising what could be done and should be done to enhance credit support". Economists took that to mean the ECB might not purchase government securities but rather private-sector debt.
http://www.independent.co.uk/news/business/news/ecb-divided-as-trichet-hints-at-plan-to-print-money-1661116.html
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Received on Fri Apr 3 15:27:07 2009
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