The European Central Bank will accelerate the pace of money printing to buy government bonds over the next two months, one of its top officials said, while voicing concern about recent swings on bond markets. The comments from Benoit Coeure, initially made in private on Monday at a conference attended by one of Britain's richest hedge fund managers Alan Howard, some of his peers and academics, sent markets into a flurry when they were published on Tuesday.
Anticipating a flood of yet more euros onto the market, the single currency tumbled when the ECB released its Executive Board member's remarks, sending European shares rising to near multi-year highs.
Coeure said the speed of the recent spike in bond yields, was worrisome and that the ECB could "moderately" increase its buying in May and June so that it did not fall below its monthly buying target. He said, however, that the two were not linked.
Other central bankers chimed in with support for the ECB's fledgling scheme to buy 60 billion euros a month of chiefly government bonds, a programme known as quantitative easing.
"The Eurosystem is ready to go further if necessary ...," Christian Noyer, who as governor of the Bank of France also sits on the ECB's decision-making Governing Council, said in Paris.
The excitable market reaction, pulling the euro down below $1.12 and paring back the returns or yields on government bonds, illustrates how critical money printing is to confidence.
An ECB spokesman said that the intention had been to publish Coeure's speech immediately but that an error delayed it until Tuesday morning.
Money printing is already helping to boost bank lending and buoy price inflation, although both stay at low levels.
Fresh data on Tuesday showed that euro zone prices were flat year-on-year in April, ending four months of falls.
Consumer prices across the 19-country euro zone rose 0.2 percent month-on-month while core inflation, which excludes energy and unprocessed food, was 0.2 percent for the month of April, and 0.7 percent year-on-year.
Nonetheless, the euro zone, shaken by a debt and banking crisis, remains fragile.
The mood among German analysts and investors, for instance, deteriorated far more sharply than expected in May as bumpy financial markets made the outlook for Europe's largest economy uncertain.
German think tank ZEW said on Tuesday its monthly survey of economic sentiment fell to 41.9 points from 53.3 in April - far below even the lowest forecast in a Reuters survey.
But there are some signs of hope that one of the biggest clouds hanging over the currency bloc, Greece, may be about to lift.
Greece's labour minister said Athens would soon strike a deal with its foreign backers to unlock further loans to the cash-starved country.
Greece's new leftist government has been in talks with its European and International Monetary Fund lenders over the past four months about the release of around 7.2 billion euros ($8.1 billion) in loans.
Asked on Greek TV when Athens would reach the cash-for-reform deal, Labour Minister Panos Skourletis said: "De facto, in the coming days."
"There's a deadline, which is June 5," he said - the date on which Greece's next repayment of a loan to the IMF falls due. "We all know that if there is no solution, let's say until then, in relation to funding, things will be difficult."