2nd LD Writethru: ECB to start euro zone quantitative easing

The European Central Bank (ECB) decided on Thursday to start quantitative easing by purchasing public and private securities in a bid to address prolonged low inflation.

ECB President Mario Draghi said the purchasing would start in March 2015 with a monthly amount of 60 billion euros (about 69.48 billion U.S. dollars), and was intended to last until the end of September 2016, but would in any case be conducted until the ECB saw a sustained adjustment in the path of inflation which is consistent with its medium-term inflation maintenance target of below, but close to, 2 percent.

Annual inflation rate in the euro zone dipped to negative territory in December 2014 and reached minus 0.2 percent despite ECB's previous stimulating efforts of cutting interest rates and buying private sector bonds and asset-backed securities.

Draghi said the purchases of securities issued by euro zone governments and agencies would be based on national central banks' share in the ECB's capital key.

He said the extended asset purchasing, which also included securities issued by European institutions, would be coordinated by the ECB and conducted also by individual national central banks. Among them, 20 percent would be subject to "a regime of risk sharing."

That leaves 80 percent of the assets to be held by national central banks with the risk of losses the responsibility of the individual central bank.

Germany is widely seen as the country which was strongly opposed to risk sharing. It wants to avoid a situation where it was exposed, for example, to losses on Greek or Italian bonds. Giving up risk sharing was seen as the only way the ECB could persuade Germany to support quantitative easing.

Draghi said the decision was made against a backdrop that inflation dynamics continued to be weaker than expected.

Earlier on Thursday, the ECB decided to keep key interest rates unchanged at a historically low level. Endit