LUXEMBOURG, (Reuters) - The European Central Bank is satisfied with the effects of its bond buying programme on the economy and inflation and has no intention of ending it prematurely, ECB Executive Board Member Yves Mersch said on Saturday.
In March, the ECB started buying 60 billion euros worth of euro zone government bonds a month to inject more cash into the economy and reverse a trend of falling prices.
“We are seeing that ... we have stopped the negative bank lending rates and are starting to get new credit into the economy through the banking system,” Mersch told Luxembourg radio.
“But we also see ... we also have an effect on inflation, because at the same time there was a risk that Europe would slip into deflation,” he said.
He said that while cyclical factors in the economy also played a part, “at the ECB we are quite satisfied, that we have taken the right measures at the right time and that is probably why they were more effective.”
The ECB’s bond buying programme is set to last at least until September 2016, but some economists have speculated that given its early positive effects, the bank may be tempted to cut it short. Mersch said there were no such plans.
“We have based all our previsions on a projection where we see that growth is picking up, that inflation is getting closer to the inflation target, and that would be the case if we bought 60 billion every month,” he said.
“If we stopped now, we would call into question our whole projection. We are currently on a trajectory, we believe in that trajectory, that trajectory so far seems to confirm to us that we are right. And therefore there is no reason to say: No, we are now calling into question everything again,” he said.
He said the ECB expected euro zone inflation would stay close to zero until autumn of this year, before starting to rise towards the end of the year towards 1.5 percent.
Price growth might reach the ECB’s target of inflation below, but close to 2 percent over the medium term towards the end of 2016, he said.
(Reporting By Michele Sinner, writing by Jan Strupczewski
Editing by Jeremy Gaunt.)
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