Senior European Central Bank officials signaled Friday that the bank is ready to boost its EUR1.7 trillion bond-purchase program again, countering investor concerns that the ECB could start to slow down its asset purchases.
At an annual gathering of finance ministers and central-bank governors in Washington, ECB President Mario Draghi warned that the region’s economic growth had turned out slightly weaker than expected and highlighted risks to the outlook.
The ECB will “act by using all the instruments available within our mandate” if it fears it might miss its inflation target of just below 2%, Mr. Draghi said.
Earlier this week, financial markets were rattled by a Bloomberg report that the ECB had reached a consensus on how to gradually reduce its asset purchases. Most economists had expected the ECB to go in the opposite direction, extending its bond purchases beyond March, when they are currently due to end.
In an interview with The Wall Street Journal on Thursday, ECB governing council member Vitas Vasiliauskas insisted that the central bank hadn’t discussed how it would taper, or slow down, its asset purchases.
“We hadn’t discussed anything. I was surprised by such media interpretations,” Mr. Vasiliauskas said.
The ECB has rolled out unprecedented stimulus in recent years in an effort to reinvigorate the region’s weak economy, cutting interest rates below zero and buying EUR80 billion a month of public and private debt. Policy makers hope that by buying bonds, they can drive down interest rates, encouraging people to borrow and bolstering growth.
But the minutes of the ECB’s latest policy meeting, published on Thursday, showed widespread concerns within the bank’s 25-member governing council over the failure of inflation to pick up more substantially. Eurozone inflation was just 0.4% last month, far below the ECB’s target of just below 2%.
Peter Praet, the ECB’s top economist, said on Friday that the central bank was “very closely monitoring economic and financial market developments,” and was determined to preserve its stimulus until inflation picks up.
“If needed, we will not hesitate to act by using all the instruments available within our mandate,” Mr. Praet said.
While the eurozone’s economy has so far appeared resilient to global and political uncertainty, Mr. Praet said, “there are downside risks” for growth.
Taken together, the recent comments by ECB officials are “an explicit hint that more easing is coming,” said Gizem Kara, an economist at BNP Paribas in London.
Both ECB officials also called on eurozone governments to help out the central bank by reshaping their economies to boost growth.
Mr. Draghi urged governments to seize a “unique window of opportunity” created by the ECB’s easy-money policies to implement economic reforms.