{"id":19355,"date":"2020-09-20T23:01:00","date_gmt":"2020-09-20T20:01:00","guid":{"rendered":"https:\/\/bestinsurance.gr\/a1\/?p=19355"},"modified":"2020-09-20T23:01:00","modified_gmt":"2020-09-20T20:01:00","slug":"ecb-to-review-flagship-bond-buying-tool-in-fighting-covid-crisis","status":"publish","type":"post","link":"https:\/\/bestinsurance.gr\/a1\/archives\/19355","title":{"rendered":"ECB to review flagship bond-buying tool in fighting Covid crisis"},"content":{"rendered":"

The European Central Bank has launched a sweeping review of its main pandemic crisis-fighting tool, which some of its top policymakers believe could lead to contentious changes to its other asset-purchase programmes.<\/span><\/p>\n

The review will assess the impact of the flagship bond-buying scheme that the ECB launched in response to the coronavirus crisis in March and expanded to \u20ac1.35tn in June, two of its governing council members told the Financial Times on condition of anonymity.<\/span><\/p>\n

They said important questions for the review would be to consider how long the Pandemic Emergency Purchase Programme should continue and whether some of its extra flexibility should be transferred to the ECB\u2019s longer running asset-purchase schemes.<\/span><\/p>\n

\u201cHaving that extra flexibility has been very useful,\u201d said one council member. \u201cWe should look at all bits of the toolkit very carefully. We will have a good discussion, a good debate, and I don\u2019t know where we will end up.\u201d<\/span><\/p>\n

The ECB declined to comment on the review, which is expected to be discussed by the council next month. It comes as debate is intensifying on the council over whether it should start drawing up plans to wind down the PEPP or consider expanding it further.<\/span><\/p>\n

Until the new programme\u2019s introduction, the ECB\u2019s sovereign bond purchases were bound by self-imposed rules, designed to avoid it being accused of using monetary policy to directly finance governments, which is illegal under EU law.\u00a0<\/span><\/p>\n

It might be easier for some national central banks to accept that we expand the traditional asset purchase programme rather than the PEPP<\/span><\/p>\n

ECB council member<\/span>
\nThis changed with the PEPP, which ditched the restriction of only buying up to a third of a country\u2019s debt and introduced a more flexible interpretation of the rule requiring it to buy sovereign bonds in proportion to the size of each country\u2019s economy.\u00a0<\/span><\/p>\n

It also started buying Greek government bonds, breaking with the ECB\u2019s tradition of not buying debt rated below investment grade.<\/span><\/strong><\/p>\n

Any move to increase the flexibility of the ECB\u2019s overall bond-buying programme is likely to prove controversial, particularly among its critics in Germany who are gearing up to launch another legal challenge at the country\u2019s constitutional court.\u00a0<\/span><\/p>\n

When the court ruled in May that the ECB needed to do more to explain why its government bond-buying had not breached EU law, it pointed to the self-imposed rules as a key reason why the purchases still appeared to be legal.<\/span><\/p>\n

A second council member said the review would look at whether the ECB should shift away from using the PEPP and focus instead on increasing the scale of its other asset purchase programmes, while potentially giving them the same extra flexibility.\u00a0<\/span><\/p>\n

\u201cIt might be easier for some national central banks to accept that we expand the traditional asset purchase programme rather than the PEPP,\u201d said the second council member.<\/span><\/p>\n

Some ECB council members are concerned that the PEPP risks becoming a more lasting part of the central bank\u2019s policy framework, especially after it was extended from the end of this year until June 2021.<\/span><\/p>\n

Jens Weidmann, president of Germany\u2019s Bundesbank and one of the longest-serving ECB council members said this month that \u201cthe emergency monetary policy measures must be scaled back when the crisis is over\u201d. He added: \u201cWhen deciding on the PEPP, it was particularly important to me that it have a time limit and be explicitly tied to the crisis.\u201d<\/span><\/p>\n

As of last week, the ECB had bought \u20ac527bn assets under the PEPP on top of the more than \u20ac2.8tn of assets it owns under its other asset purchase programmes. Some economists expect it to increase its bond-buying plans by a further \u20ac500bn as early as December in an attempt to raise inflation back towards its target of just below 2 per cent.<\/span><\/p>\n

Source: link<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

The European Central Bank has launched a sweeping review of its main pandemic crisis-fighting tool, which some of its top policymakers believe could lead to contentious changes to its other asset-purchase programmes. The review will assess the impact of the flagship bond-buying scheme that the ECB launched in response to the coronavirus crisis in March<\/p>\n","protected":false},"author":1,"featured_media":15767,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-19355","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19355","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/comments?post=19355"}],"version-history":[{"count":2,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19355\/revisions"}],"predecessor-version":[{"id":19357,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19355\/revisions\/19357"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media\/15767"}],"wp:attachment":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media?parent=19355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/categories?post=19355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/tags?post=19355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}