PARIS (Reuters) - French central bank chief Francois Villeroy de Galhau said on Tuesday that the European Central Bank's new bond purchase scheme was unnecessary, joining a growing list of public critics since the bank unveiled its move two weeks ago.
With growth and inflation both slowing, the ECB cut rates deeper into negative territory on Sept. 12 and said it would start buying debt indefinitely, hoping to push borrowing costs even lower in the hope of rekindling growth.
But the fresh bond buys, opposed by more than a third of the rate-setting Governing Council, generated unusual public discontent in a body that normally strives to take decisions by consensus and keeps its disagreements out of public sight.
"I was not in favour of the resumption of net asset purchases at this time because I thought that further purchases are unnecessary right now - I stress 'right now' - given the very low levels of both long-term interest rates and term premia," Villeroy said in a speech at the Paris School of Economics.
But he added that he supported other parts of the package, which included a rate cut, a fresh pledge to keep rates low for longer and a multi-tier deposit rate.
"Our forward guidance is now strongly 'state-based', reflecting our enhanced commitment to reach our objective. This is significant progress that has perhaps been overshadowed by the arguments over QE," he said.
Quantitative easing or QE denotes large-scale central bank asset purchases.
Villeroy, who rarely dissents in public, joins Bundesbank chief Jens Weidmann, Austria's Robert Holzmann and Dutch central bank governor Klaas Knot in criticising the bond buys.
Outgoing ECB chief Mario Draghi said on Monday that stimulus was necessary a since an economic recovery was nowhere in sight, as underlined by a string of weak data.
Draghi also hit back at critics, saying that he had never criticised ECB decisions in public while serving as the head of Italy's central bank. He said public criticism risked weakening the effect of the stimulus.
(Reporting by Leigh Thomas; Writing by Balazs Koranyi; Editing by Richard Lough)
