October 7, 2021

Is ECB Studying New Bond Purchases?

 The European Central Bank (ECB) is reviewing a new bond -buying program to prevent any market turmoil when emergency buying is halted next year, according to sources familiar with the matter.

Bloomberg reports the plan will replace existing stimulus tools and complement an existing open quantitative easing scheme that currently earns $ 23.1 billion in bonds per month.

However, so far no decision has been made, the source said.

An ECB spokesman declined to comment on the report, saying that staff discussed a range of ideas that were not necessarily communicated to the Governing Council or the Executive Board.

The initiative will act as a safeguard measure should the € 1.85 trillion Pandemic Emergency Purchasing Program (PEPP) end in March.

Under the plan, purchases will be made selectively, which is seen as contrary to two existing programs that require central banks to buy bonds in line with each country’s economic measurements.

The regulation has been in place since large-scale asset purchases began in 2015. This is intended to allay concerns that the ECB is funding the government, which is something that is prohibited by law.