Lutz Karpowitz at IREPAS: ECB’s bond buying program raises inflation risks

Speaking at the SteelOrbis Fall 2012 Conference and 67th IREPAS Meeting held in Munich, Lutz Karpowitz, the director of FX strategy within Commerzbank, told attendees that the Outright Monetary Transactions (OMT) program of the European Central Bank (ECB), which includes purchasing unlimited sovereign bonds of European Union member countries with short-term maturity (three years or less) aimed at "safeguarding an appropriate monetary policy transmission", is raising risks of high inflation, as the ECB has to print as much money as needed.
 
Stating that the ECB's previous programs, including its Securities Markets Program (SMP), LTRO1 and LTRO2, have only provided very short-term relief, Mr. Karpowitz said that there are serious concerns regarding the sustainability and the effectiveness of the OMT program. In addition, he told attendees that he believes the OMT will prevent the problematic economies of the EU, such as Greece, Spain and Italy, from taking sustainable and effective measures to reduce their current account deficits.