A European Central Bank (ECB) official has hinted that the central bank could ramp up its €1.1 trillion (£780bn) asset purchase programme as soon as December.
“The debate is open” due to the fact that inflation expectations are still weak, Benoit Coeure told Le Figaro in an interview due to be published tomorrow.
A major issue was whether factors that were often seen as temporary, such as falls in commodity prices, would prevent inflation returning to its two per cent target over the long term. If the ECB judges that inflation will undershoot over the long term, “additional measures would be taken”.
“We will decide in December based on the information at our disposal,” he said. "Today, the risks weighing on growth and inflation are downward."
The ECB official also said that the US Federal Reserve’s interest rate decision in December would not impact the ECB’s decision directly.
He also tried to appease critics of easy monetary policy. He said the ECB acknowledged that low rates “have negative effects”.
"We don't wish for this monetary policy to last too long, but we will apply it as long as necessary given our mandate," he added.
Germany’s top economic advisers yesterday told the ECB to taper its asset purchasing, which has been running at a rate of €60bn a month since March and is set to continue until September 2016.
"Monetary policy is leading to a build-up of risks to financial stability which could pave the way for a new financial crisis," the advisers said in their annual report.
"Persistently low interest rates erode the earnings of banks and life insurance companies, and raise the appetite for taking risks. It is important to avoid delaying an exit from the low interest rate environment for too long."