Villeroy from ECB considers using quantitative easing instead of negative rates

According to Francois Villeroy de Galhau, Governing Council member at the European Central Bank (ECB), the best alternative tool for managing monetary policy is large-scale asset purchases.

In an article published on Monday, the head of the France's central bank said that quantitative easing should be the regulator's priority to achieve “lasting change” when rates are at low levels.

However, some ECB officials are skeptical of the tool because of its consequences. In the past, they resulted in asset bubbles, increased instability, and subsequent losses for some eurozone central banks. Yet, Villeroy favors quantitative easing over a move to negative rates.

Tools including long-term refinancing operations and the Transmission Protection Instrument (TPI) should be used first to ensure that the ECB's actions cover the economies of all 20 countries in the region, Villeroy de Galhau told Les Echos.

Meanwhile, other senior ECB officials, including Isabelle Schnabel, hinted at the possibility of using quantitative easing in a more restrained format.