FRANKFURT (MNI) – The European Central Bank managed to jump-start
the covered bond market with “small action,” ECB Governing Council
member Christian Noyer said Friday, referring to the bank’s decision to
purchase E60 billion worth of the bonds.
The ECB has now expanded bond purchases to government bonds but
has not pre-committed to a total purchase amount. Executive Board member
Lorenzo Bini-Smaghi said the volume will depend on its effectiveness.
Speaking during an ECB conference here, Noyer also said that the
central bank’s “clear and unambiguous mandate to achieving price
stability” has allowed it to act “decisively when the financial system
was in danger of paralysis.”
Noyer said that markets fully understood that the ECB will “never
do anything to endanger price stability.” Well-anchored inflation
expectations are particularly important especially during a crisis, he
said.
The governor of the Bank of France also said that the ECB has
successfully managed to keep a clear separation between monetary policy
and liquidity provision throughout the crisis.
The built-in exit from excess liquidity once a refi operation
expires means that the central bank does not have to be concerned about
its balance sheet, Noyer added.
–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com
[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]
