NAPLES, ITALY - European Central Bank (ECB) head Mario Draghi says a stimulus programme that includes buying private-sector bonds will mean a significant increase in the bank's efforts to help the economy.
European Central Bank chief Mario Draghi, left, presiedes an ECB executives meeting in Naples, Italy, on Thursday. (EPA photo)
After the bank decided to keep interest rates on hold Thursday, Mr Draghi said the bank will start buying bonds made of bundles of bank loans in October. The purchases are meant to encourage banks to make more of the loans from which they are constructed.
Mr Draghi said the purchases would have a "sizeable impact on our balance sheet,'' which measures how much the bank is doing to support the economy.
Mr Draghi has said he wants to push the balance sheet towards levels it had in 2012, which would imply 1 trillion euros (US$1.26 trillion) in new stimulus.
Mr Draghi added Thursday that the bank is ready, if needed to step up its bond purchases - a step that would pour newly printed money into the financial system.
He noted recent data confirms the weakening of growth in the 18-countries that use the euro. The eurozone did not grow at all in the second quarter.
"I have said many times, our recovery is weak, fragile, and uneven, and still is,'' he said.
Speculation that the ECB may make wider purchases to include government bonds has weighed on the euro, driving it down from $1.39 in early May to around $1.26. So far, that has been one of the most significant effects of the ECB's record low interest rates and loose monetary policy. The lower euro helps raise inflation, currently at a worringly low 0.3%. And it helps exporters by making their goods cheaper in foreign markets.