ECB May Buy Bonds Early 2015

        FRANKFURT-European Central Bank Vice President Vitor Constancio sent the strongest signal to date Wednesday that the ECB is prepared to buy government bonds early next year if it decides that more aggressive stimulus measures are needed.
        In remarks prepared for delivery at a conference in London, Mr. Constancio said the ECB expects measures it has already agreed on to get the size of its balance sheet back to the level it had early in 2012. This would mean that the balance sheet would be about 1 trillion euros ($1.24 trillion) higher than it is presently.
        "We have, of course, to closely monitor if the pace of its evolution is in line with that expectation. In particular, during the first quarter of next year we will be able to gauge better if that is the case," he said.
        "If not, we will have to consider buying other assets, including sovereign bonds in the secondary market, the bulkier and more liquid market of securities available," he added.
        The remarks strongly hint that the ECB isn't likely to pull the trigger on broad-based asset purchases, known as quantitative easing, at its meeting next week, but would be more inclined to do so early next year.
        Write to Todd Buell and Brian Blackstone at todd.buell@wsj.com and brian.blackstone@wsj.com
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        (END) Dow Jones Newswires

        November 26, 2014 04:30 ET (09:30 GMT)

By Todd Buell And Brian Blackstone 

        FRANKFURT--European Central Bank Vice President Vitor Constancio sent the strongest signal to date Wednesday that the ECB is prepared to buy government bonds early next year if it decides that more aggressive stimulus measures are needed.
        In remarks prepared for delivery at a conference in London, Mr. Constancio said the ECB expects measures it has already agreed on to get the size of its balance sheet back to the level it had early in 2012. This would mean that the balance sheet would be about EUR1 trillion ($1.24 trillion) higher than it is presently.
        "We have, of course, to closely monitor if the pace of its evolution is in line with that expectation. In particular, during the first quarter of next year we will be able to gauge better if that is the case," he said.
        "If not, we will have to consider buying other assets, including sovereign bonds in the secondary market, the bulkier and more liquid market of securities available," he added.
        The remarks strongly hint that the ECB isn't likely to pull the trigger on broad-based asset purchases, known as quantitative easing, at its meeting next week, but would be more inclined to do so early next year.
        Last week, comments from ECB President Mario Draghi led some observers to believe that the central bank might take more dramatic measures as early as Dec. 4. Mr. Draghi said the ECB was prepared, if needed, to expand its purchases of assets, which raises the amount of money flowing in the economy
        Subsequent comments from conservative Governing Council members suggested, however, that some on the rate-setting body wanted to wait and see how the already agreed measures played out before agreeing to new ones. The ECB has started buying covered bonds and asset-backed securities and is offering conditional loans to banks at four-year maturities.
        Mr. Constancio said that any sovereign bond purchases "would be a pure monetary policy decision, buying accordingly to our capital key, within our mandate and our legal competence."
        The ECB deputy also said that inflation has been "very distant" from the ECB's target for over a year "and threatens to continue on the low side for some time to come." Annual inflation was 0.4% in the eurozone last month, far below the ECB's target of just below 2%.
        He also said that "the environment of low nominal growth now prevailing creates serious risks to the social and economic fabric of the euro area."
        Write to Todd Buell at todd.buell@wsj.com and Brian Blackstone at brian.blackstone@wsj.com
        (END) Dow Jones Newswires

        November 26, 2014 04:35 ET (09:35 GMT)

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