FRANKFURT (Reuters) - The European Central Bank’s massive bond purchases do not aim to influence borrowing costs for individual euro zone countries but to boost inflation, ECB President Mario Draghi told a Portuguese member of the European parliament on Friday.
Portugal’s bond yields have risen faster than those of other euro zone countries over the past year as the ECB slowed the purchase of the country’s debt to avoid owning more than a third of the total, a self-imposed rule.
This has raised some concerns about the outlook for Portugal’s public finances at a time when its banking sector remains fragile and its economic recovery tentative.
But Draghi reiterated the ECB’s only objective is to boost inflation.
“The asset purchase program (APP) addresses the risks of too long a period of low inflation and has not been designed to target yield developments in individual euro area countries,” Draghi said in the letter.
Targeting yields, an innovative move now adopted by the Bank of Japan last year, would allow the ECB to support countries that need it the most with its 2.3 trillion euros bond-buying program.
But it would also be politically difficult in the euro zone, where each of 19 member countries issues its own bonds and there is no joint debt.
Reporting By Francesco Canepa; Editing by Andrew Heavens