FRANKFURT (MNI) – The European Central Bank’s new bond program is a
necessary monetary policy tool that does not seek to circumvent the ban
on monetary financing by the central bank, the ECB reiterated in its
monthly bulletin released Thursday.
In a “compliance” note included in the report, the ECB said its
Outright Monetary Transactions program unveiled on September 6 was
needed to address “severe distortions in government bond markets which
originate, in particular, from unfounded fears on the part of investors
of the reversibility of the euro.” The OMT was therefore needed to
restore the ECB’s ability to conduct a single monetary policy.
“From the ECB’s perspective, OMTs are a necessary, proportional and
effective monetary policy instrument. They aim at ensuring an effective
transmission of the Eurosystem’s monetary policy and, thereby, at
securing the conditions for an effective conduct of the single monetary
policy within the euro area, with a view to achieving its primary
objective of maintaining price stability,” the report said.
The ECB’s report recognizes that even bond purchases on the
secondary bond market could in some circumstances violate the ECB’s
treaty and made clear that “secondary-market purchases of public debt
instruments will, under no circumstances, be used to circumvent the
objectives of the prohibition on monetary financing.”
“In defining the operational modalities for OMTs, particular care
has been given to the need to comply with the prohibition on monetary
financing,” the report said.
The ECB argued that bond buying will only be used “to the extent
necessary to achieve the objective of maintaining price stability,”
which means there will be a “strict selection” of countries that qualify
for OMT bond buys.
— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com
[TOPICS: M$X$$$,M$$EC$,MGX$$$,MT$$$$,M$$CR$]
