FRANKFURT (Reuters) – A top U.S. Federal Reserve official urged the European Central Bank on Tuesday to consider employing a U.S.-style quantitative easing programme to counter slowing inflation and recession in the euro zone.
The ECB has engaged in bond purchases in the past but has always withdrawn an equivalent amount of money from markets to ensure its interventions are neutral for the money supply, fearful of stoking inflationary pressures.
“For the euro area, which has not wanted to do QE, I would say this: if more monetary policy accommodation is desired, and it might be because inflation is running pretty low in the euro area, the Governing Council on the ECB may want to consider a GDP-weighted quantitative easing programme,” he said in a lecture at Frankfurt’s Goethe University.
Asked whether he was on a mission from the Fed to convince the ECB of a policy change, he said: “If you know me, I’m always trying to convince people about my own views and sometimes I win, sometimes I don’t. But no, I speak for myself and certainly not for the Committee.”
The ECB has mothballed its previous bond-buy plan, the Securities Markets programme (SMP), and has yet to activate its new plan – the Outright Monetary Transactions (OMT) policy.
Full article: Fed Reserve suggests quant easing for EU zone (The West Australian)