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ECB launches corporate bond buy

Wednesday, June 08, 2016 - 01:26

The European Central Bank begins buying corporate bonds, hoping to convince companies to borrow and spend. As David Pollard reports it's the latest effort to revive rock-bottom inflation in the euro zone.

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Lunch time in south-east Paris. Time for sausages - and a strike. If labour reform is France's own challenge, low inflation is the euro zone's. That triggering the European Central Bank's latest effort to turn up the heat on a lukewarm economy. (SOUNDBITE) (English) CHIEF ECONOMIC ADVISER, CEBR, VICKY PRYCE, SAYING: "The interesting thing about buying corporate bonds is that you give the money directly to the companies. Now, of course, you choose, because there are lots of criteria in terms of what types of bonds one buys, but there will be a number of sectors that will benefit." Under its boss, Mario Draghi's massive QE programme, the ECB is already buying around 80 billion euros of mostly government debt a month. Its new move into corporate bonds could amount to 10 billion euros of purchases on top of that. There are unknowns: like whether companies with already easy access to credit will want more cheap cash. Or whether it will succeed in spurring new investment - and fuelling demand. (SOUNDBITE) (English) CHIEF ECONOMIC ADVISER, CEBR, VICKY PRYCE, SAYING: "The reality is that we've been suffering in Europe of the euro zone certainly from deflation in some of the last few months and the whole point is to inject as much liquidity as you possibly can." France's large corporate debt market could mean it will benefit. And it does look like it still needs help. The Bank of France just now warning that industrial morale is waning. And that growth could slow this quarter - its economy, it seems, still on the back burner.

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ECB launches corporate bond buy

Wednesday, June 08, 2016 - 01:26