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ECB ready to decide on QE by January meeting

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ECB ready to decide on QE by January meeting

Benoit Coeure

(FRANKFURT) - The European Central Bank is not divided over the issue of sovereign bond purchases and will be in a position to reach a decision this month, two top officials said Tuesday.

"The discussion is very far advanced," ECB executive board member Benoit Coeure told the daily Die Welt in an interview.

"We had a discussion last week on many of the technical details. We are definitely in a position to make a decision on January 22," when the ECB's policy-setting governing council meets next, Coeure said.

"But that does not mean we will actually make a decision," he added.

Financial markets are betting that the ECB council will announce plans for a programme of so-called "quantitative easing" or "QE" when it holds its first policy meeting of the year on January 22.

QE is the large-scale purchase of government bonds, a policy so far pursued by other central banks around the world to kick-start their economies.

But there are critics of such a programme in Europe, notably the Bundesbank or German central bank, which believes QE will take away the pressure on governments to reform their economies and is effectively a licence to print money to get them out of debt.

ECB chief Mario Draghi has said in the past that unanimity is not needed for a programme of QE to go ahead.

But Coeure said that would not be the preferred option.

"It would be both possible and allowable. But it wouldn't be recommendable. The more council members vote for the measures, the more certain I would be that we'd weighed up the arguments for and against and minimised the risks," Coeure said.

In a separate interview with the business daily Handelsblatt, Bank of France governor Christian Noyer insisted that the governing council was not sharply divided over the issue of QE.

"It's not as if there is one camp pitted against the other. It's more complex than that," Noyer said.

"Many of us have changed our mind over the course of time, pondering the question whether further monetary easing is the only way to safeguard price stability," Noyer said.

Consumer prices in the euro area dropped by 0.2 percent year-on-year in December, the first time since October 2009 that inflation has been negative in the single currency region.

The weak inflation number, reflecting in part the collapse of global oil prices, raised fears that the region is on the brink of deflation, the pernicious long-running fall in prices that undermines growth and is difficult to correct.

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