The European Central Bank’s OMT Programme

The European Central Bank (ECB) officially justifies its “Outright-Monetary-Transactions” programme (OMT programme) by citing disruptions to monetary policy, shown by the fact that interest rates for companies in the crisis countries of the Eurozone have hardly dropped despite the massive drop in central bank interest rates. The goal of the OMT programme is to reduce the yields on government bonds in secondary markets in order to reduce interest rates on loans. This article suggests that the OMT programme is not the right tool for achieving the stated goal of restoring monetary policy transmission.