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| E.C.B. Signals Broader Action to Stimulate Europe’s Economy | E.C.B. Signals Broader Action to Stimulate Europe’s Economy |
| (about 2 hours later) | |
| FRANKFURT — The European Central Bank on Thursday moved closer to the same kind of large-scale purchases of government bonds used by the Federal Reserve to stimulate growth in the United States, implying that it was ready to pump as much as 1 trillion euros into the economy. | FRANKFURT — The European Central Bank on Thursday moved closer to the same kind of large-scale purchases of government bonds used by the Federal Reserve to stimulate growth in the United States, implying that it was ready to pump as much as 1 trillion euros into the economy. |
| “This is the main message: The balance sheet will continue to expand,” Mario Draghi, the president of the central bank, said at a news conference. He added that if current measures, including purchases of private sector assets, did not do the job, the central bank was ready to go further. | “This is the main message: The balance sheet will continue to expand,” Mario Draghi, the president of the central bank, said at a news conference. He added that if current measures, including purchases of private sector assets, did not do the job, the central bank was ready to go further. |
| European stock indexes rose as investors interpreted the remarks to mean that the central bank was moving closer to quantitative easing, or Q.E., the large-scale buying of government bonds, which is also known as sovereign debt. | European stock indexes rose as investors interpreted the remarks to mean that the central bank was moving closer to quantitative easing, or Q.E., the large-scale buying of government bonds, which is also known as sovereign debt. |
| “We’re one step closer to full-blown sovereign Q.E.,” Luke Bartholomew, investment manager at Aberdeen Asset Management, said in a statement. | “We’re one step closer to full-blown sovereign Q.E.,” Luke Bartholomew, investment manager at Aberdeen Asset Management, said in a statement. |
| The bank left its benchmark interest rate unchanged on Thursday, at 0.05 percent. The announcement was a formality because the rate is already effectively as low as it can go, and an increase would be out of the question when eurozone growth is slowing. | The bank left its benchmark interest rate unchanged on Thursday, at 0.05 percent. The announcement was a formality because the rate is already effectively as low as it can go, and an increase would be out of the question when eurozone growth is slowing. |
| At the news briefing, Mr. Draghi said that the bank’s governing council had charged the central bank staff and “the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed.” | At the news briefing, Mr. Draghi said that the bank’s governing council had charged the central bank staff and “the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed.” |
| Major indexes in Europe initially rose about 1 percent after Mr. Draghi made those assurances, then fell back, with the Euro Stoxx 50-stock index closing 0.34 percent higher. | |
| Mr. Draghi also sought to rebut reports of dissension among the 24 members of the central bank’s governing council, which includes all the heads of national central banks in the eurozone. He emphasized that all members had signed off on a statement implying increased readiness to deploy quantitative easing. | Mr. Draghi also sought to rebut reports of dissension among the 24 members of the central bank’s governing council, which includes all the heads of national central banks in the eurozone. He emphasized that all members had signed off on a statement implying increased readiness to deploy quantitative easing. |
| “It’s fairly normal to disagree about things,” he said. At their customary dinner on Wednesday night, Mr. Draghi said, members of the council had “perhaps the best discussion we ever had.” | “It’s fairly normal to disagree about things,” he said. At their customary dinner on Wednesday night, Mr. Draghi said, members of the council had “perhaps the best discussion we ever had.” |
| Carsten Brzeski, an analyst at ING Bank, said in a note to clients, “If there was any internal conflict within the governing council, Mario Draghi hushed it.” | Carsten Brzeski, an analyst at ING Bank, said in a note to clients, “If there was any internal conflict within the governing council, Mario Draghi hushed it.” |
| Mr. Draghi said the central bank’s recent steps, including the private asset purchases and cheap loans made available to banks, are expected to increase the size of its balance sheet “towards the dimensions it had at the beginning of 2012.” | Mr. Draghi said the central bank’s recent steps, including the private asset purchases and cheap loans made available to banks, are expected to increase the size of its balance sheet “towards the dimensions it had at the beginning of 2012.” |
| The value of central bank assets, including gold, money owed by banks, and securities owned by the bank, was about €3 trillion, or about $3.75 trillion, at the end of March 2012, compared with €2.1 trillion this month. | The value of central bank assets, including gold, money owed by banks, and securities owned by the bank, was about €3 trillion, or about $3.75 trillion, at the end of March 2012, compared with €2.1 trillion this month. |
| The central bank’s balance sheet peaked in 2012 as banks took advantage of cheap central bank loans to compensate for a dearth of market funds. | The central bank’s balance sheet peaked in 2012 as banks took advantage of cheap central bank loans to compensate for a dearth of market funds. |
| Mr. Draghi said he expected the supply of private-sector assets to expand because of central bank demand. But he said it was too early to give specifics on how the bank would expand its holdings by such a large amount. | Mr. Draghi said he expected the supply of private-sector assets to expand because of central bank demand. But he said it was too early to give specifics on how the bank would expand its holdings by such a large amount. |
| Most analysts assume, however, that the bank will eventually have no choice but to buy government bonds to have enough of an impact on the economy. | Most analysts assume, however, that the bank will eventually have no choice but to buy government bonds to have enough of an impact on the economy. |
| Since it last met a month ago, the central bank has begun buying private-sector assets known as covered bonds, bundles of bank loans packaged for sale to investors and guaranteed by issuing banks. As of Oct. 31, the central bank had spent 4.8 billion euros, or about $6 billion, buying covered bonds. It plans to make more purchases in the coming months. | Since it last met a month ago, the central bank has begun buying private-sector assets known as covered bonds, bundles of bank loans packaged for sale to investors and guaranteed by issuing banks. As of Oct. 31, the central bank had spent 4.8 billion euros, or about $6 billion, buying covered bonds. It plans to make more purchases in the coming months. |
| Because the supply of private sector assets that meet the central bank’s quality standards is limited, many analysts expect it to eventually resort to purchases of government bonds, emulating the quantitative easing used by the Federal Reserve. The European Central Bank is widely seen as having acted timidly compared with the Federal Reserve or the Bank of England. | Because the supply of private sector assets that meet the central bank’s quality standards is limited, many analysts expect it to eventually resort to purchases of government bonds, emulating the quantitative easing used by the Federal Reserve. The European Central Bank is widely seen as having acted timidly compared with the Federal Reserve or the Bank of England. |
| “We need to see more coming out of the E.C.B.,” Mark Zandi, chief economist at Moody’s Analytics, said in Frankfurt on Wednesday. | “We need to see more coming out of the E.C.B.,” Mark Zandi, chief economist at Moody’s Analytics, said in Frankfurt on Wednesday. |
| In Germany, there is widespread fear that central bank bond buying would amount to a transfer of wealth from better-off countries to poorer ones. Many Germans believe they would have to pick up the tab if some countries defaulted on bonds owned by the bank. | In Germany, there is widespread fear that central bank bond buying would amount to a transfer of wealth from better-off countries to poorer ones. Many Germans believe they would have to pick up the tab if some countries defaulted on bonds owned by the bank. |
| Joining the advocates for a more aggressive approach by the central bank was Ángel Gurría, the secretary general of the Organization for Economic Cooperation and Development. | Joining the advocates for a more aggressive approach by the central bank was Ángel Gurría, the secretary general of the Organization for Economic Cooperation and Development. |
| “There is an increasing risk of stagnation in the euro area,” Mr. Gurría said Thursday morning at a news conference in Paris. “Countries must employ all monetary, fiscal and structural reform policies at their disposal to address these risks and support growth.” | “There is an increasing risk of stagnation in the euro area,” Mr. Gurría said Thursday morning at a news conference in Paris. “Countries must employ all monetary, fiscal and structural reform policies at their disposal to address these risks and support growth.” |
| Recent economic data has added pressure on the central bank to act. The annual rate of inflation in the eurozone was 0.4 percent in October, up from 0.3 percent in September but still dangerously low in the eyes of many economists. In addition, eurozone unemployment remains at 11.5 percent. | Recent economic data has added pressure on the central bank to act. The annual rate of inflation in the eurozone was 0.4 percent in October, up from 0.3 percent in September but still dangerously low in the eyes of many economists. In addition, eurozone unemployment remains at 11.5 percent. |
| While the eurozone is not officially in deflation, a destructive downward price spiral, even the current low level of inflation can cause consumers to delay making purchases, companies to lose revenue and unemployment to soar from its already high levels. | While the eurozone is not officially in deflation, a destructive downward price spiral, even the current low level of inflation can cause consumers to delay making purchases, companies to lose revenue and unemployment to soar from its already high levels. |