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ECB has models to buy 'one trillion in bonds'

German Newspaper FAZ says "divisions" within ECB

04 April, 20:14
ECB has models to buy 'one trillion in bonds' (ANSA) -Berlin, April 4 - German newspaper Frankfurter Allgemeine Zeitung (FAZ) has reported that European Central Bank (ECB) has developed economic models for the purchase of bonds of up to one trillion euros as part of a quantitative easing (QE) program.

This follows ECB President Mario Draghi Thursday's statement that he would take whatever measures necessary to maintain price and economic stability.

"The council is been unanimous in its commitment to also use unconventional measures", said Draghi.

In the weakest scenario, an injection of liquidity would raise the inflation rate by only 0.2%, according to one model, while another simulation brings it up 0.8%.

FAZ also cited an ECB spokesperson as saying that the ECB and the European Union "will continue reflections on the various scenarios that will be made." In Saturday's edition, Faz reports on the strong divisions within the ECB regarding the effectiveness of an eventual QE plan. According to some, an impulsive transmission would be much less effective compared to what happened in the United States.

"The question would be whether the private debt market in Europe is big enough for QE," an ECB insider was quoted as saying, while another unnamed banker was concerned about market distortions, commenting that looking at companies' holdings, a "bubble'' can already be discussed.