Draghi: ECB never discussed helicopter money

11/29, 5:19 PM (Source: TeleTrader.com)

Helicopter money, proposed as an alternative to quantitative easing measures in an environment of low interest rates and weak growth, has never been discussed by the European Central Bank (ECB), its president Mario Draghi said on Tuesday.

In a letter to a member of the European Parliament Jonás Fernández, Draghi explained that the issue of theoretical compatibility of helicopter money with the prohibition of monetary financing, which is one form of it, is not quite straightforward. However, direct cash transfers to Eurozone citizens by the ECB could result in legal complexities if the central bank is seen as financing an obligation of the public sector towards third parties, and thereby violating the aforementioned prohibition.

In fact, helicopter money as a monetary policy instrument is not even necessary, the rate-setter suggested, adding that the transmission mechanism of the ECB's existing measures is proving to be "very effective." Draghi concluded by saying the bank will use its December meeting to assess the inflation outlook and the implications it might have for the ECB's policy stance.

Teletrader Newsroom / IB