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ECB’s Praet: Buying sovereigns would be a powerful signal

ECB Executive Board member Peter Praet said the ECB will not hesitate to act to meet its mandate, but only if needed.

The article directly addresses whether the ECB has done enough and whether it will do more.

Have we at the European Central Bank reacted swiftly enough to maintain price stability in the face of threats, as our mandate requires? I think the answer is yes.
He also repeats the lines we’re heard from a variety of ECB members, including him on other occasions.

That is why the ECB Governing Council has reiterated its unanimous commitment to use additional unconventional instruments within its mandate should it become necessary to address a prolonged period of low inflation, or should the monetary stimulus fall short of our intention to move our balance sheet toward its size in early 2012.

He openly talks about buying corporate bonds or sovereigns. He said the problem with corporates is that the market is small while that isn’t a problem with sovereigns

Interventions in this market would likely entail a stronger signal that the ECB is committed to maintaining an accommodative monetary policy for an extended period of time.
Overall, he says, “we will not hesitate to act.” The ECB is looking more and more like it will roll out sovereign QE on Jan 22, or announce corporate bond purchases and hint at a sovereign announcement at the next meeting.

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