BRUSSELS, Dec 21 (Reuters) – The European Central Bank should start buying government bonds to tackle poor investor confidence and low inflation in the euro zone, governing council member Luc Coene said in an interview published on Saturday.
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The Belgian central bank chief said the bank had already waited too long, and that this could be one tool to spur economic activity in the 18-country euro zone and fight off deflationary pressures.
“In this context, the purchase of sovereign bonds could prove to be an effective tool,” he told La Libre Belgique.
“Since the beginning of 2014, we have systematically underestimated deflationary effects…if we were to find ourselves at the beginning of next year with negative inflation and fall into a deflationary spiral, the effects on the behaviour of households and businesses could be very negative.”
Inflation in the single currency area was 0.3 percent year-on-year in November, well below the ECB’s headline target of inflation below, but close to 2 percent.
The ECB Governing Council will hold its next policy meeting on Jan. 22.