LONDON, June 6 (Reuters) - The ECB could launch a broad-based asset purchase programme potentially by the end of the year, if its latest measures fail to gain traction and inflation expectations began to slip, the bank’s vice president said on Friday.
Speaking to reporters on the sidelines of an IIF conference, Vitor Constancio said the ECB expected a big take-up for its new batch of ultra-cheap loans and that it hoped it would mean that asset purchases, although an option, were not required.
“For the type of contingencies and challenges we face now, what we did we think is enough. If some downward shock were to create a much deteriorated situation then we will have to think about all sorts of unconventional policies,” Constancio said.
“In that circumstance, we would have to contemplate the use of a broader programme of asset purchases.”
He said with financial market-derived midterm inflation expectations still near to 2 percent, any large scale bond-buying was still some way away.
He added that it would probably take until the end of the year, when banks have had the chance to get their hands on the ECB’s new round of cheap loans, to know whether its actions on Thursday had been effective.
“Only after the second tranche in December of the initial allowance of the new (loan) facility will we then gauge the impact, because by then the comprehensive assessment (AQR) will be completed and banks will know what is their situation,” he said.
“I hope there will be a significant take-up (by banks for new loans). I would not put any number except that the maximum could be 400 billion for the first initial allowance.” (Reporting by Marc Jones and Francesco Canepa; Editing by Hugh Lawson)