Greater Chances of Sovereign QE – hints ECB's Praet

FXStreet (Mumbai) - Peter Praet, the European Central Bank’s (ECB) Chief Economist signaled in an interview by the German publication that ECB policymakers may soon consider large-scale asset purchases, including sovereign bonds, at their next meeting on January, 22.

Key Quotes:

Praet warned that euro-area inflation is expected to drop below zero "for a longer period" in 2015 amid falling oil prices, and the Governing Council "cannot simply look through" that.

Inflation expectations are now "extremely fragile" and the danger of following effects is "higher than usual,"

He also added the ECB must "not be paralyzed" by the problems a quantitative easing (QE) program might bring. Sovereign bonds are "the only kind of asset for which there is a significant market volume."

With reference to Greece snap elections, Praet commented, “the rise of political parties opposed to structural adjustments is a warning signal". "Populists in some countries promise fast and simple solutions but their proposals would be a complete disaster."