Via the FT:
“Helicopter” is a word that dare not speak its name in the corridors of the European Central Bank.
Peter Praet, the ECB’s chief economist, is the latest senior figure to douse talk of central bank helicopter drops, claiming the notion is not even discussed “informally” by policymakers.
In an interview with Spanish paper Expansión (republished by the ECB here), Mr Praet said:
Mario Draghi already pointed out that the use of this instrument would be very complex and fraught with legal difficulties. The option has not been on the table, not even informally.
It’s a change in tone from Mr Praet, arguably the ECB’s chief dove, who said last month that helicopter money – where a central bank injects money straight into the veins of an economy or the pockets of consumers – was possible in “principle”, telling La Repubblica:
All central banks can do it. You can issue currency and you distribute it to people. That’s helicopter money… The question is, if and when is it opportune to make recourse to that sort of instrument which is really an extreme sort of instrument.
There are other things you can theoretically do. There are several examples in the literature. So when we say we haven’t reached the limit of the toolbox, I think that’s true.
Still, in his more recent interview, Mr Praet suggested that the bar for further actioneven on negative rates is rather high:
interest rates remain part of a broader toolbox. But deploying negative rates again in the future would require a distinct worsening of the inflation outlook. As Mario Draghi himself said, I don’t think we’re going to see these conditions materialising in the near future. But the instrument is in the toolbox in case risks re-emerge.