The European Central Bank should use the purchases of titles with greater caution in the future, due to expensive side effects, said the president of the Dutch central bank Klaas Knot, on Friday, when the ECB is starting a review of its strategy.
The ECB has purchased trillion euros of debt in the last ten years expecting to rekindle inflation when it was very low and more than 4 trillions of euros remain in securities under its inauguration, influencing market prices years after the end of the need to stimulus.
Although ultra -grad inflation is now a distant perspective, the authorities can delineate, as part of the review, since they will respond to this scenario, given the mixed success of the previous purchases of titles.
Knot, the oldest member of the ECB council, argued that the purchases of titles, commonly known as quantitative ease, should be short but vigorous to have an immediate impact on prices and market feelings.
“My personal preference in these cases would be to vigorously use quantitative ease when necessary to avoid deflationary risks, but to avoid using it excessively persistent Amsterdam.
His comments echo to the opinions expressed by Isabel Schnabel, who previously claimed that the bar to start the process should be higher than in the past, since the titles can be gradually canceled and thus distort the prices of the activities of a long period.
Knot also said that the purchases of securities are more effective when inflation is much below the objective and that the justification for its application disappears when inflation approaches the objective.
“Quantitative ease is not very effective in the subtle regulation of inflation. At the same time, purchases of activities have possible side effects, such as the prices of inflated activities, the allocation of resources and risks for the balance of the heritage of the Central Bank. “
Source: Terra
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