Muller calls for ECB to stick to ‘capital key’ in bond buys

Economy
© Reuters. Outbreak of the coronavirus disease (COVID-19) near Frankfurt © Reuters. Outbreak of the coronavirus disease (COVID-19) near Frankfurt

TALLINN (Reuters) – The European Central Bank should limit how much its bond purchases deviate from each country’s shareholding in the bank to ensure its policies remain proportional and benefit all euro zone members, Governing Council member Madis Muller said.

Muller’s comments suggest limits to the flexibility that the ECB maintains its Pandemic Emergency Purchase Programme (PEPP) includes and allows it to deviate from this “capital key”.

The ECB scooped up all of Italy’s new debt in April and May, buying well above the country’s capital key quota, even if it merely managed to keep borrowing costs from rising.

Muller’s specific reference to proportionality may also indicate increased caution by ECB policymakers after Germany’s top court ruled it exceeded its powers with another purchase scheme because it failed to prove it was proportional.

“It’s important that the agreed flexibility in the programme is somewhat larger than in other asset purchase programmes but the limit in the capital key has a reason,” Muller said.

“In the end, we have to make sure that we create policy for all euro zone countries and it should have a proportional effect,” the Estonian central bank chief told a news conference.

The ECB last week increased PEPP by 600 billion euros but Muller said the scheme must be temporary and unless growth deteriorates further, another may not be necessary.

“If the economic growth recovers in the second half as ECB forecasts and the inflation outlook does not significantly weaken, then probably an additional increase in asset purchases is not needed,” Muller added.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Let’s block ads! (Why?)

Economy News

Leave a Reply

Your email address will not be published. Required fields are marked *