The European Central Bank is exploring alternatives to its controversial bond-purchase programme but has yet to decide on any replacement policy tool, ECB Governing Council member Ewald Nowotny told a German website in comments published on Tuesday.
Nowotny, who is also Austria's national central bank chief, said there was scepticism on the policymaking Council about the bond-buy programme because we fear the market imperfections that we want to correct with this could emerge in another area.
We are discussing possible alternatives. But this discussion is not so far developed that we can dispense with the SMP (bond-buying programme), Nowotny told the Wall Street Journal's German website.
He declined to say what direction the talks were heading in, adding only: That is a discussion that encompasses the whole monetary policy spectrum.
The need for some type of intervention is widely recognised, he said.
On one hand, the ECB is under political pressure to take more aggressive action to put an end to Europe's debt crisis. On the other, many voices inside Germany, led by the Bundesbank, oppose both bond-buying and anything beyond that.
The Bundesbank feels the bond-buying programme - never mind the outright quantitative easing that many economists have called for - takes the ECB into the realm of fiscal policy and away from its core role of delivering stable prices.
Bundesbank chief Axel Weber quit in protest at the programme last year and another heavyweight German ECB policymaker, Juergen Stark, also resigned over the plan.
The ECB more than tripled its bond purchases last week to the highest level since late November, spending 3.77 billion euros as a calm start to the New Year gave way to an intensification of the euro zone debt crisis.
The bond purchases face renewed scrutiny after Standard & Poor's mass euro zone rating downgrades on Friday, though the ECB has resisted political pressure from within and beyond the euro zone to step up the programme on a major scale.
Nowotny noted that the ECB had cut interest rates twice in the final two months of last year, as well as funnelling cheap funds to banks to help stabilise the financial system.
We are all agreed that now the point is to allow these measures to take full effect. Only then will we take further decisions, he added, suggesting the ECB is not poised to cut interest rates again anytime soon.
The ECB left rates on hold at 1.0 percent at its first policy meeting of 2012 last week, pausing to assess the impact of the back-to-back cuts and a slew of other policy measures it took late last year to help fight the euro zone debt crisis.
For the ECB 'We never pre-commit' always applies, but there are no plans whatsoever at the moment.
With the euro zone crisis nonetheless refusing to abate, the ECB faces pressure to embark on a policy of quantitative easing (QE) - essentially printing money - as the U.S. Federal Reserve and the Bank of England have already done.
Asked whether the ECB would be ready to engage in QE, Nowotny said: It is our task to prevent price stability going off target on the upside and on the downside and in each case to implement the appropriate instruments.
These comments appear to leave open the possibility that Nowotny believes the ECB could embark on QE - a path Bundesbank board member Carl-Ludwig Thiele rejected on Monday.
One idea should be brushed aside once and for all - namely the idea of printing the required money, Thiele said. Because that would threaten the most important foundation for a stable currency: the independence of a price stability orientated central bank.
However, German daily Financial Times Deutschland said, citing anonymous sources, that the ECB Governing Council is also discussing the possibility of engaging in a U.S.-style QE.
Buying non-government debt is another option, the newspaper said in the article, to be published in its Wednesday edition, but made available to news agencies on Tuesday.
(Reporting by Alexandra Hudson,; writing by Brian Rohan/Paul Carrel; Editing by Andrew Hay)