SINTRA, Portugal, June 28 (Reuters) – The new bond-purchasing program the European Central Bank (ECB) is drawing up will help prevent an excessive widening of yield spreads within the euro zone while maintaining pressure on governments for fiscal discipline, ECB President Christine Lagarde said on Tuesday.
“The new instrument will have to be effective while being proportionate and including sufficient safeguards to preserve the momentum of member states towards a sound fiscal policy,” she said at the Forum of Central Banks organized by the BCE in Sintra, Portugal.
As the ECB prepares to raise interest rates, it added that it would do so “gradually (…) but with the possibility of acting decisively in the event of a deterioration in inflation in the medium term, especially if signs of unanchoring of inflation expectations appear”. (Report Francesco Canepa, French version Marc Angrand)
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