“The Governing Council has announced its intention to intervene in the bond markets to ensure the proper transmission of monetary policy,” Noyer told Le Point magazine in an interview published today. The remarks were confirmed by his office in Paris. “Our operations will be sufficient to have a strong impact on the markets.”
The remarks underline French support for a plan outlined by ECB President Mario Draghi one week ago for the central bank to wade into bond markets in tandem with Europe’s rescue fund. Draghi noted in his Aug. 2 press conference that Germany’s Bundesbank has reservations about the proposal, details of which still need to be hammered out.
“We need to be ready to intervene very quickly and favoring bonds with shorter maturities,” said Noyer, who is also governor of France’s central bank. “No one should have any doubt about the Governing Council’s determination and capacity to act within the framework of its mandate.”
Draghi said last week new purchases in the secondary market would only complement buying by Europe’s rescue fund in the primary market, to which strict conditionality is attached.
“This is about acting against excessive sovereign risk premiums,” Noyer said. “Of course this would only make sense if member states themselves decide to act” and make the “necessary budget improvement.”
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