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ECB pulls QE trigger on deflation

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ECB pulls QE trigger on deflation

Mario Draghi - Photo ECB

(FRANKFURT) - The European Central Bank on Thursday unveiled plans for a massive programme of bond purchases to avert the threat of deflation in the euro area.

After the ECB held its key interest rates at their current all-time lows at its first policy meeting of 2015, central bank chief Mario Draghi said a programme would be launched to buy 60 billion euros of private and public bonds per month starting in March.

"The combined monthly purchases of public and private sector securities will amount to 60 billion euros ($70 billion). They are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation," Draghi told a news conference.

Critics had expressed concern that European taxpayers would have to foot the bill of such a programme, known as quantitative easing (QE), if any one country defaulted on its debt.

But the plan had been designed so that only 20 percent of those risks would be shared, with the other 80 percent to be shouldered by the national central banks of the countries concerned, Draghi said.

QE is regarded as the central bank's most powerful tool yet to ward off deflation in the single currency area, where consumer prices actually started to fall in December.

Quantitative easing, deflation explained

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