Asset
Credit: Reuters/Ralph Orlowski
Sabine Lautenschlaeger, executive board member of the European Central bank (ECB), looks on during the Bundesbank Banking Congress ''Symposium on Financial Stability and the Role of Central Banks'' in Frankfurt, February 28, 2014.
The ECB's president, Mario Draghi, told his monthly news conference last Thursday that the bank's Governing Council was 'unanimous in its commitment to also using unconventional instruments within its mandate, should it become necessary.'
Lautenschlaeger said a broad asset-purchase program was, in principle, part of the ECB's arsenal but that the requirements for using such a plan should be 'particularly high'.
'Only in a real emergency, for example in the case of the immediate prospect of deflation, could, in my view, such an instrument come into consideration,' Lautenschlaeger said in the text of a speech for delivery in Hamburg.
'Such risks are, however, neither perceptible nor do we expect them.'
Lautenschlaeger's stiff resistance to embarking a U.S.-style program of creating money to buy assets - so-called quantitative easing (QE) - shows the strength of opposition in some quarters at the ECB to such a policy.
Bundesbank chief Jens Weidmann, who also sits on the ECB's policymaking Governing Council, said after Draghi's news conference last Thursday that the ECB should not leave policy too loose for too long.
Lautenschlaeger, a former Bundesbank vice president, said the requirements for using a broad asset-buy plan should be high because the side effects are large.
Having interest rates on sovereign and corporate bonds that are too low could set false incentives and build up risks, she said, adding that the monetary policy motivation for embarking on a broad asset-buy plan would have to be 'without question'.
(Reporting by Jan Schwartz; Writing by Paul Carrel; Editing by Toby Chopra)
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