— Rate Cut Remains An Option, Not Recently A Priority
FRANKFURT (MNI) – The European Central Bank’s new bond-buying
program is not aimed at subsidizing governments’ borrowing costs, but is
meant to improve the monetary transmission mechanism, ECB Executive
Board member Benoit Coeure said in a Financial Times interview dated
Monday.
The Outright Monetary Transactions [OMT] program is “not here to
lower borrowing costs of countries,” Coeure said in an interview on the
FT’s webiste. It is meant “to improve monetary policy transmission…and
also to eliminate redenomination risk,” he said.
Earlier today, Governing Council member Yves Mersch said in a
speech that “the OMTs will be only used if – and to the extent –
necessary to ensure price stability.”
Coeure said that the central bank had already been “very clear on
modalities of OMTs and we’re not going to provide any more details now.”
The Spanish government has said repeatedly that it wanted more
details about the conditions attached to the ECB bond market
intervention before it decided whether or not to seek an aid program
that would kick-start ECB support.
Coeure reiterated that OMTs would only be effective if countries
met the conditions attached and confirmed that the ECB would
“absolutely” suspend assistance should a country slip in hitting
targets. “We’re not threatening countries,” Coeure said. “It’s just a
condition for the OMTs to be effective.”
On a possible rate cut, Coeure said that it remained an option, but
had not recently been a priority. “The priority has been to fix the
monetary transmission channels,” Coeure told the FT. “It certainly
remains an option but as you know we don’t pre-commit.”
— Frankfurt bureau: +49 69 720 142; email: frankfurt@mni-news.com —
[TOPICS: M$X$$$,M$$EC$,MT$$$$,M$G$$$,MGX$$$]
