THE European Central Bank (ECB) has scope to buy more assets as its quantitative easing has been small compared to similar schemes elsewhere, ECB vice president Vitor Constancio said, adding that Europe also needs the U.S. and Chinese economies to motor ahead.

    The asset buys, started in March to lift the bloc out of deflation, helped Europe to weather the Greek and Chinese turmoil but euro area inflation could turn negative again in the coming months so the bank stands ready to increase the size, composition and duration of the scheme, if necessary, Constancio said.

    Drawing a comparison with other major central banks around the globe, Constancio said the European scheme is dwarfed by past asset buys, particularly by the U.S. Federal Reserve and the Bank of Japan.

    “The total amount that we have purchased represents 5.3 percent of the GDP (gross domestic product) of the euro area, whereas what the Fed has done represents almost 25 percent of the U.S. GDP, what the Bank of Japan has done represents 64 percent of the Japanese GDP and what the United Kingdom has done 21 percent of the country’s GDP,” Constancio told Reuters in an interview.

    “So we are very far from what the major central banks have done,” Constancio, 71, said. “This is not a benchmark ... (but) there is scope, if the necessity is there.”

    But Constancio also dismissed criticism from some that quantitative easing was not working, pointing to improved inflation expectations, growth in bank lending and a drop in borrowing costs despite the anxiety in financial markets.

    He also said that the bank needs to look through volatility even if market turbulence is now more prevalent than in the past.

    “Monetary policy is not about fine tuning volatility in financial markets,” he said. “Central banks should be independent from financial markets and not follow all their fluctuations.”

    (SD-Agencies)