(Reuters) – The European Central Bank is considering buying corporate bonds on the secondary market and may decide on the matter as soon as December with a view to begin purchases early next year, several sources familiar with the situation told Reuters.
European shares rallied on the news, led by banks and shares in peripheral countries. The euro fell more than half a cent against the dollar and credit indices tightened sharply.
Policymakers are desperate to revive the euro zone economy, which is barely growing and dogged by low inflation of 0.3 percent, far below the ECB’s target of just below 2 percent.
The ECB has already carried out work on corporate bond buying, which would widen out the private-sector asset-buying program it began on Monday. It is hoping these measures will foster lending to businesses and thereby support the euro zone economy.
“The pressure in this direction is high,” said one person familiar with the work inside the ECB, speaking on condition of anonymity.
An ECB spokesman, however, said of such purchases: “The Governing Council has taken no such decision.”
The ECB has already cut interest rates to record lows, offered banks cheap loans and begun buying covered bonds, which are backed by high-quality assets. It also plans to start buying asset-backed securities, or bundled loans, later this year.
Stressing that the ECB alone cannot tackle the euro zone’s woes, central bank president Mario Draghi has urged crisis-hit countries to get their economies into shape with reforms.
He has also made a thinly veiled appeal for Germany to embark on a round of deficit-funded investment spending. But with Germany wedded to strict budget discipline and other countries taking time to implement structural reforms, markets are looking to the ECB to do more.
The ECB’s policymaking Governing Council could discuss the possibility of making corporate bond purchases at its December meeting, two of the four sources Reuters spoke to said. All four said such plans were being discussed.