Brussels, 03/06/2009 (Agence Europe) - The forthcoming meeting of the European Central Bank (ECB) is unlikely to decide on a further drop in interest rates, economists predict. On Thursday 4 June, after the meeting of the Council of Governors, its President, Jean-Claude Trichet, is instead likely to announce the technical details of ECB's plans to buy "covered bonds". This initiative has led to concern on the part of the German government.
These "unconventional" measures were announced last month by Mr Trichet (EUROPE 9897), following on from a movement initiated by the Federal Reserve and the Bank of England (BoE), which have both already for some time been carrying out "quantitative easing" measures. The ECB is to confirm this Thursday that it is prepared to make available 60 billion euros in the form of the purchase of covered bonds (by mortgage loans or public authority loans), whereas the Federal Reserve and the BoE have committed themselves to the level of, respectively, 300 billion dollars and 125 million pounds sterling. Concerned at the medium-term impact on inflation of these measures, Angela Merkel has criticised the decision of the ECB and its American and British counterparts. She points out that the expansionist budgetary and monetary policies taken since the beginning of the crisis will eventually be withdrawn. "I am very sceptical about the extent of the Fed's actions and the way the Bank of England has carved its own little line in Europe", the German Chancellor explained at a conference in Berlin on Tuesday 2 June. According to the Financial Times of 3 June, she stressed that "even the European Central Bank has somewhat bowed to international pressure with its purchase of covered bonds", adding: "we must return to independent and sensible monetary policies, otherwise we will be back to where we are now in 10 years' time". Although the governments are obliged to find their way back to the road to budgetary consolidation, the Central Banks, for their part, must claw back the cash resources of which they had been depriving the market for several months. This has already been mentioned by Mr Trichet, who confirmed a month ago that the measures taken and cash resources provided may soon be stopped and absorbed, once the macro-economic environment has improved. The intervention of the German Chancellor may also aim to prevent any additional initiative on the part of the ECB, for the purchase of assets. However, it is unlikely that the ECB has any intention of doing this, having rejected a more ambitious asset acquisition plan of a total volume of 125 billion (including securitised bonds and collateralised bond obligations). (A.B./trans.fl)