ECB to intervene in bond markets, cuts eurozone growth

The European Central Bank said Thursday it will launch a new programme to purchase the sovereign bonds of eurozone countries, but strictly within the bank's policy mandate. The announcement came as the ECB slashed its forecast for growth in the eurozone for both this year and next, it said, as the debt crisis increasingly takes it toll on the 17-nation bloc. ECB chief Mario Draghi told a news conference that it would launch a scheme of "Outright Monetary Transactions or OMTs in secondary markets for sovereign bonds in the euro area. As we said a month ago, we need to be in the position to safeguard the monetary policy transmission mechanism in all countries of the euro area." And Draghi added the ECB was acting "strictly within our mandate to maintain price stability over the medium term; we act independently in determining monetary policy; and the euro is irreversible." He admitted that the decision to buy bonds of eurozone states with sky-high borrowing costs was not unanimous and one of the bank's governing council had a "dissenting view". "It was not unanimous ... there was one dissenting view," Draghi told reporters, adding: "I will leave you to guess who that was", amid reports Germany's central bank chief had expressed reservations about the programme. The ECB said its staff expects the economy to shrink by 0.4 percent in 2012 and then grow by 0.5 percent in 2013, a reduction from its previous call in June of minus 0.1 percent for this year and plus 1.0 percent next year. The bank also raised its forecast for inflation, estimating that prices would rise by 2.5 percent in 2012, up from a June forecast of 2.4 percent. Next year, prices were seen rising by 1.9 percent, compared with the 1.6 percent forecast issued three months ago.