The European Central Bank will buy assets for at least two years to boost inflation and economic growth in the euro area, President Mario Draghi said.
The Frankfurt-based central bank will start buying covered bonds this month and plans to purchase asset-backed securities starting this quarter, Draghi said today at a press conference in Naples, Italy, after the ECB left interest rates unchanged at record lows. “These purchases will have a sizable impact on the balance sheet,” he said.
The purchase program is part of an easing plan Draghi has said will steer the balance sheet back to levels seen at the start of 2012, signaling as much as 1 trillion euros ($1.3 trillion) in assets could be added. Since June the ECB has cut interest rates twice and announced a range of measures such as loans to banks aimed at boosting credit to the real economy.
German 10-year yields rose two basis points to 0.92 percent, after touching 0.896 percent yesterday, the lowest since Sept. 2. The yield on Greek 10-year debt dropped 10 basis points to 6.39 percent.
The central bank will release further details of the asset-purchase plan at 3:30 p.m. local time, Draghi said. He didn’t provide investors with a size for the planned purchases. Policy makers are unanimous in embarking on further policy measures if necessary, he said.
Price Cuts
The ECB will buy assets in nations with debt rated below BBB minus, with caveats, he said.
Inflation slowed to 0.3 percent last month, the least in almost five years, and the central bank’s preferred measure of medium-term inflation expectations has extended its decline. Economic growth in the currency bloc came to a halt in the second quarter, increasing the risk that the euro area will fall into recession for the third time since 2008.
Factories cut prices in September by the most in more than a year and manufacturing shrank in Germany, the region’s largest economy, as well as in France, Austria and Greece.
The ECB’s 24-member Governing Council left its benchmark interest rate at 0.05 percent today. The decision was predicted by all 60 economists in a Bloomberg News survey. The deposit rate and the marginal lending rate remained at minus 0.2 percent and 0.3 percent, respectively.
