European Central Bank President Jean-Claude Trichet on Friday said the bank has not moved towards more ample liquidity conditions and the decision to buy government bonds is not part of any monetary policy easing.
"Like all the other non-standard measures that we have taken, the Securities Markets Programme is time-bound in nature," Trichet said in a speech in Moscow. He noted that the move was aimed at ensuring the proper transmission of monetary policy impulses to the wider economy and, ultimately, to the general price level.
The ECB chief said the bank has not gone beyond the goal of re-establishing the proper transmission of monetary policy and not changed its monetary policy stance. The ECB also maintained the current level of interest rates, a level that it think is appropriate.
He noted that by sterilizing its interventions, the ECB precisely intends to guarantee that the monetary policy stance remain unaffected. Through sterilization, the ECB withdraws the money it spent on buying bonds. The bank accumulated EUR 47 billion by the end of last week under the programme.
Further, Trichet stressed that the bond purchases made on the secondary market cannot be used to circumvent the fundamental principle of budgetary discipline. "We have taken note of the commitments of euro area governments to take all the measures needed to meet their fiscal targets," he said. "We have also taken note of the precise additional commitments undertaken by some euro area governments to speed up fiscal consolidation and to ensure the sustainability of their public finances," he said.
Moreover, he stated that it is crucial that the governments rigorously implement the measures needed to ensure fiscal sustainability. Moreover, a key lesson to be learnt from this episode of turmoil is that the euro area needs to take a quantum leap forward to improve the effectiveness of its surveillance of fiscal and economic developments, Trichet added.
With regard to inflation, the central banker emphasized that inflation expectations in the euro area have remained well-anchored in line with the Governing Council's definition of price stability throughout the financial crisis. This is borne out by a range of indicators. In the results of the Survey of Professional Forecasters, for example, inflation five years ahead has continuously been expected to stand at either 1.9% or 2% since the beginning of 2002.
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