PARIS (Reuters) - The European Central Bank’s new bond purchase scheme is unnecessary, French central bank chief Francois Villeroy de Galhau said on Tuesday, joining a chorus of public criticism of the program.
With growth and inflation both slowing, the ECB two weeks ago cut rates deeper into negative territory and said it would buy 20 billion euros worth of debt per month indefinitely, hoping to push borrowing costs even lower to kick start growth and eventually boost prices.
A string of dismal data has been published since the Sept 12 meeting and Germany’s Ifo Institute said on Tuesday that the bloc’s biggest economy is likely already in recession due to weakness in manufacturing.
But some policymakers took a more sanguine view and more than a third of the rate-setting Governing Council opposed the fresh bond buying, unusual public discontent in a body that normally strives to take decisions by consensus and keeps its disagreements out of public sight.
“I was not in favor of the resumption of net asset purchases at this time because I thought that further purchases are unnecessary right now - I stress ‘right now’ - given the very low levels of both long-term interest rates and term premia,” Villeroy said in a speech at the Paris School of Economics.
But he added that he supported other parts of the package, including a tiered deposit rate and new guidance on keeping interest rates low until inflation had risen robustly.
Villeroy said the ECB should keep the share of private assets purchased under the scheme to a “minimum” or risk sending the wrong signal about the riskiness of the assets.
Villeroy, who rarely dissents in public, joins Bundesbank chief Jens Weidmann, Austria’s Robert Holzmann and Dutch central bank Governor Klaas Knot in criticizing the bond buys.
Outgoing ECB chief Mario Draghi said on Monday that stimulus was necessary since an economic recovery was nowhere in sight, as underlined by a string of weak data.
Draghi also hit back at critics, saying that he had never criticized ECB decisions in public while serving as the head of Italy’s central bank. He said public criticism risked weakening the effect of the stimulus.
Christine Lagarde takes over from Draghi on Nov. 1 and analysts say her first task will be to heal the rift in the Governing Council by spending more time listening to diverging views then her predecessor.
Appearing open to a fresh start, Villeroy also noted that now the decision had been made, it was up to other policymakers, particularly governments, to do their job.
“Whatever the debate in the Governing Council has been, let us now look forward and stress one simple message that has unanimous agreement: monetary policy has, once more, done its duty,” Villeroy added.
Reporting by Leigh Thomas; Writing by Balazs Koranyi; Editing by Richard Lough and Kirsten Donovan