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ECB’s Muller Says More Assets Could Join Stimulus List in Slump

Piotr Skolimowski

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European Central Bank policy maker Madis Muller said the central bank could broadened its asset-purchase program, if the economic situation in the euro area deteriorates significantly.

“Right now, we are doing unconventional things,” he told students at a Bundesbank event in Frankfurt on Saturday. “You could -- of course -- imagine even more unconventional things if the situation gets really bad.” He declined to cite specific assets.

Muller, who opposed September’s decision to resume ECB net asset purchases, cited the Japanese and Swiss central banks as examples of policy makers pursuing wider stimulus efforts than in the euro zone. The comments come as the ECB struggles to revive inflation through stimulus measures, while also running the risk of hitting self-imposed limits on how many bonds it can buy from each of the euro zone’s 19 member governments.

There “are ways to go beyond the government bonds, and a little bit of corporates and other assets that we are buying now,” Muller said. Still, he didn’t recommend it, he said.

The ECB is currently buying 20 billion euros ($22 billion) of assets a month after amassing 2.6 trillion euros during a previous round of purchases that ended last year. Government bonds represent the bulk of the program.

The central bank has pledged to continue quantitative easing until inflation is firmly within its target of just under 2%, something that its own forecasts don’t foresee until at least 2021. It currently doesn’t anticipate a recession and the euro-area economy did better than predicted in the third quarter.

Read more: Bundesbank’s Weidmann Says Germany Is Not in an Economic Crisis

Muller, the youngest member of the Governing Council at 42, said the central bank needs to think about how low it wants to push government bond yields and what benefits that would bring.

Policy makers also have to be “aware of different side effects and think twice before you do something,” particularly given how many unconventional steps the ECB has already taken, the Estonian central bank governor said.

Having very low interest rates “makes sense” in the current economic situation, said Muller, who was in favor of the decision to reduce the deposit rate to minus 0.5% in September. Still, going much further may not help.

“There is a question of how low you can go,” he said. “At some point you could be facing a question of how effective it is.”

To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Neil Denslow, Sara Marley

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