ECB’s Lagarde Says QE to Continue Despite German Court Ruling

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(Bloomberg) -- European Central Bank President Christine Lagarde said she’ll continue with the institution’s bond-buying programs despite Germany’s top court questioning the legality of one of them.

“I am not at all worried, not about the program linked to the pandemic, and not about the previous program, under which the Eurosystem has been purchasing bonds since 2015,” she said in an interview with multiple European newspapers published Monday. “We remain undeterred in delivering on our price stability objective.”

Germany’s constitutional court ruled this month that the 2015 asset purchase program, which has bought 2.7 trillion euros ($3 trillion) of debt and is still running, might not be proportionate to the risk of adverse side effects and so might be illegal. It gave the ECB three months to justify the policy or the Bundesbank -- which accounts for about a quarter of purchases -- will have to drop out.

Lagarde signaled the ECB is ready to defy that prospect.

“All national central banks should fully participate in the determination and implementation of monetary policy in the euro area,” she said. “Each national central bank in the euro area is independent and cannot take instructions from governments. This is laid down in the Treaty.”

The ECB’s Pandemic Emergency Purchase Program was announced in March and is scheduled to buy 750 billion euros of debt this year, with fewer restrictions than the older program. Most economists predict it will will have to be expanded -- perhaps as soon as the next policy meeting on June 4.

The president declined to be drawn on how likely that is.

“We have been very clear and we continue to be very clear -- we will not hesitate to adjust the size, duration and composition of the PEPP to the extent necessary,” she said. “There is no psychological obstacle to our action.”

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