- The European Central Bank has yet to make a decision about the possibility of purchasing corporate bonds, Austian central bank president and ECB governing council member Ewald Nowotny said Wednesday.
"There has been no discussion about this [buying corporate bonds] in the governing council and no decision," Mr. Nowotny said in an interview with Market News International . "Buying corporate bonds would have the effect of increasing the balance sheet, but one has to look first at the technical possibilities."
Supporters of corporate bond purchases say it would help the ECB pump money into the eurozone economy and help raise inflation at a time when it has hit a record low. They also say it would support the ECB's current policy of supporting economic growth through the purchase of asset-backed securities, covered bonds, as well as rate cuts.
The central bank began its program of covered bond purchases on Monday, and it will begin buying asset-backed securities later this quarter. But officials have kept the door open to doing more, and Mr. Nowotny said it was legitimate for the ECB to think about ways it can grow its balance sheet at a time when it was shrinking.
"Corporate bonds are one of the markets that are still open for this," he said. There are several things the governing council would need to consider first, he added, including such issues as the volume of the market, its strength and regional distribution.
Mr. Nowotny is in favor of letting the ECB's current package of measures take effect before considering new measures such as quantitative easing based on government bond purchases.
"I'm very much for a steady hand approach now. The markets should not expect new actions from every meeting of the Governing Council ," he said. He added that the market shouldn't even expect new actions every other meeting.
Mr. Nowotny also repeated earlier comments that the ECB's purchase of asset-backed securities would be based on quality not quantity. He also said that deflation doesn't pose a current risk and that inflation should rise next year. He added that the current low inflation is partially due to low energy prices.
"It would be rather strange to regard low energy prices as a negative development. So with regard to low inflation I think one really has to look at the whole picture," he said.
