The chief investment officer of a major asset manager has said the European Central Bank (ECB) will buy government bonds in 2015.
Asoka Wöhrmann, of Deutsche Asset & Wealth Management, said domestic supply-side reforms in individual countries could be a way to help the eurozone achieve growth, adding other measures such as public sector investment as also being a potential boon.
But he said the ECB president would probably have to go further than the policies he had already announced to support the bloc, which at present stretch to buying corporate debt. “The ECB will need to continue to protect the flanks of [European] economies with further monetary policy initiatives,” he said.
“Mario Draghi has signalled his willingness to do so. He wants to increase the ECB’s balance sheet by about €1trn [£791m], a decision that would bring it up to a level of €3trn.
“But this goal cannot be reached by buying private-sector debt alone. The ECB will have to purchase sovereign bonds to achieve it.”
Mr Wöhrmann said in the US and Japan such an injection of monetary support from central bankers had “fuelled equity markets” and “drove the price of real estate and bonds”.
“At the same time, central banks’ easing policies have tended to reduce the strength of their individual currencies, a development that has benefited domestic firms by boosting exports,” he said.
“In the eurozone, these measures could have a similar effect on financial markets, giving a boost to European equities as well.
“But the primary political goal is not to create a bull market. Rather, it is to improve conditions for growth.
“For this reason, we are optimistic that, unlike in Japan, the measures will be positively received in the eurozone.”
