President Mario Draghi said the ECB would begin to buy covered bonds, a form of secured debt, from banks in mid-October and purchase asset-backed securities (ABS) - bundled loans - at some point in the fourth quarter of the year.
It hopes the programme, which will last for at least two years, will spur a market for such credit and support lending to the small- and medium-sized firms that form the backbone of the euro zone economy.
"As all our measures work their way through to the economy they will contribute to a return of inflation rates to levels closer to our aim," Draghi told a news conference.
Draghi said the intention was to pump money into the economy by expanding the ECB's balance sheet back to the sort of level it was in early 2012, which would mean adding hundreds of billions of euros - a big task.
Market expectations that the ECB will launch a broad-based quantitative easing (QE) scheme have shot up in recent months as the bloc teeters on the edge of deflation.
Draghi said the ECB council was unanimous that it would take further steps if it needed to - commonly accepted as code for QE. But that ultimate move remains a difficult one for the ECB to take, given stiff internal opposition.
Draghi faces opposition on a number of fronts
Bundesbank chief Jens Weidmann has already voiced doubts about the ABS purchase plan and his predecessor, Axel Weber, who resigned over an earlier ECB bond-buying programme, was strongly opposed.
"This is a risk transfer that was justified in an extreme situation but which I see in the current environment as by all means problematic," Weber, now chairman of Swiss bank UBS, told a conference in Vienna.
Asset-backed securities are created by banks pooling mortgages and corporate, auto or credit card loans and selling them to insurers, pension funds or now the ECB.
For the ABS plan to apply across the bloc, including countries such as Greece and Cyprus, the central bank may need to buy securities of a lower standard than it usually requires as collateral from those tapping its funding operations.
That prospect has already stirred controversy in Germany and beyond.
Draghi has appealed to governments to back the purchase plan with guarantees for some riskier ABS tranches, a step that would add a seal of security to the market and encourage other buyers.
But France and Germany have rejected that.
One thing that has gone the ECB's way is a significant fall in the euro to near two-year lows which should push import prices up and help growth via exports.
Draghi said that was largely a function of the world's major blocs being at different stages of the monetary policy cycle. The Federal Reserve is poised to end its bond-buying programme later this month.
Source: Reuters
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