The European Central Bank should consider ways to ensure that the cash it lays out in its liquidity operations reaches smaller firms and consumers, executive board member Benoit Coeure said today.
Coeure told Slovakian newspaper Hospodarske Noviny in an interview that the ECB would not allow sovereign bond yields to rise due to investors betting against the euro.
"Whether our funding operations should be better targeted to the financing of the real economy, and particularly of SMEs, even though the implementation would obviously be difficult, would deserve further thoughts," Coeure said, according to a transcript provided by the ECB.
"Any means to channel ECB liquidity where it is most needed, namely to households and enterprises, is worth considering," he added, but did not give any details.
The ECB started to provide banks with unlimited liquidity in 2008, following the collapse of Lehman Brothers, to ensure that loans remained available to firms and consumers.
It pushed out more than €1trillion of three-year loans to banks in unprecedented funding operations in December and February, a move that ECB President Mario Draghi said helped avoid a major credit crunch.
Coeure said it was still too early to draw final conclusions about the success of those long-term refinancing operations.
"The full impact of the two LTROs will be seen only when the economy recovers," he said.
Coeure also ruled out the ECB loosening its grip on inflation to stimulate growth, saying that it would just create more uncertainty and thus be counterproductive. The ECB targets inflation of just below 2 per cent, but prices have risen faster than that for the past 1-1/2 years.
The Frenchman, who joined the ECB this year, also said there was no need for world central banks to act jointly to prevent the sovereign debt crisis from escalating.