Saturday, 12 November 2011 at 13:24, Bloomberg
The crisis may lead the European Central Bank to look beyond its mandate to control inflation. (AFP)
The European Central Bank may follow the Federal Reserve and employ quantitative easing to help boost growth and scare off traders betting Italian bond yields will continue to rise, said Jerry Webman, chief economist for OppenheimerFunds Inc.
“At some point the ECB will take the lender of last resort role,” Webman said in an interview at the Asia-Pacific Economic Cooperation forum in Honolulu yesterday. “It’s got to be big enough that it’s dangerous to short, let’s call it Italian debt.”
A deepening of the sovereign debt crisis in the euro zone may lead the central bank to look beyond its mandate of controlling inflation, Webman said. Quantitative easing is a relaxation of monetary policy achieved through the purchase of longer-term securities by the central bank.
“I’m not an expert on the membership of the governing council of the European Central Bank but I can’t imagine that if they were faced with a major financial collapse or the necessity of printing money they wouldn’t print money,” Webman said.
The Italian five-year note yield was at 6.46 per cent at 5:03pm London time yesterday, from 6.23 per cent the previous week.
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