A leading international think-tank urged the European Central Bank on Tuesday to loosen the purse strings further and buy euro zone government and corporate bonds to accelerate a weak recovery.
The Paris-based Organisation for Economic Cooperation and Development (OECD) called on the ECB to emulate U.S.-style quantitative easing (QE) to help the single currency area avoid a Japanese-style deflationary spiral.
The ECB’s vice-president, Vitor Constancio, said the bank had discussed the possibility of QE but not in detail, and no technical planning work had taken place.
“All those instruments are on the table … but no decisions, we did what we did and that’s it,” he said, referring to a Nov. 7 decision to cut the bank’s key interest rate to a record low of 0.25 percent.
One of the bank’ hawks, Joerg Asmussen, said separately that more policy action was possible if inflation continues to be well below the ECB’s target, but only if deemed necessary.
“Risks of deflation may be slowly increasing,” OECD chief economist Pier Carlo Padoan told Reuters. “The ECB must be very careful and be prepared to use even non-conventional measures to beat any risk of deflation becoming permanent.”
Inflation in the 17-nation euro zone fell to its lowest in nearly four years at just 0.7 percent in October, prompting the latest rate cut. The euro zone economy is struggling to recover from its longest ever recession which ended in mid-year.
Nu mai e un economist sau altul, chiar laureati ai premiului Nobel, care cer ECB sa actioneze acum pana nu ne trezim ca au trecut 20 ani de stagnare, deflatie si chin, Japanese style. E ditamai OECD. Wake up Angela! Ai ambele modele in fata. Americanii au iesit din criza in 2-3 ani, stimuland economia cu TARP si QE. Japonezii au pierdut doua decenii cu austeritatea pana sa inceapa anul asta sa faca si ei QE – si rezultatele nu au intarziat sa apara. Come on!