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Debt purchases are within ECB's mandate: Draghi

Debt purchases are within ECB's mandate: Draghi

07/15/2014

By Brian Blackstone and Todd Buell

STRASBOURG, France -- European Central Bank President Mario Draghi said Monday that large-scale purchases of public and private debt fall "squarely" within the ECB's mandate to keep inflation low and stable.

Draghi's remarks, at a hearing at a newly formed European parliament that met in Strasbourg, France, are the latest indication that the ECB is open to additional aggressive stimulus measure if they are needed to keep inflation from staying too low for too long.

He said the ECB's ultralow interest rates -- the ECB cut them to record lows last month and installed a negative rate on bank deposits at the central bank, the largest institution to do so -- haven't fueled asset bubbles but warned of "frothy" conditions in the housing markets of some euro-area countries.

Regulatory policies are the primary defense against such risks, Draghi said, adding that monetary policy isn't the right instrument to use at a time of low inflation.

His remarks came hours after the International Monetary Fund renewed its calls for the ECB to consider big asset purchases, known as quantitative easing, to revive lending in the euro zone and keep ultralow inflation from damaging the bloc's recovery.

"QE falls squarely in our mandate," Draghi told parliamentarians.

An extended version of this article appears at WSJ.com.

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