ECB Express

You have two statements available on the website of the European Central Bank – one that mentions the monetary measures announced by the ECB – LTRO and intensification of preparations for purchase of asset-backed securities. The other is the introductory press statement by the ECB President.

In pursuing our price stability mandate, today we decided on a combination of measures to provide additional monetary policy accommodation and to support lending to the real economy. This package includes further reductions in the key ECB interest rates, targeted longer-term refinancing operations, preparatory work related to outright purchases of asset-backed securities and a prolongation of fixed rate, full allotment tender procedures. In addition, we have decided to suspend the weekly fine-tuning operation sterilising the liquidity injected under the Securities Markets Programme.

ECB has not announced outright asset purchases yet. They are trying to induce banks to lend more to the real sector. My friend said that it was the equivalent of Bank of England’s ‘Funds for Lending’ (Fund to lend). But, the law of unintended consequences will work in Europe as it did in England. London has another housing bubble. Europe will face other issues.

German media is not happy. German think-tank ZEW is not happy either.

This is what Ed Conway, the Economics editor of SKY News wrote in his blog, in conclusion:

However, it’s difficult to get escape the conclusion that the one thing markets didn’t get today – outright Eurozone quantitative easing – was the one thing they really wanted. QE is doubly tricky in the Eurozone, where there are countless legal obstacles, but if markets remain sceptical for much longer, Draghi and his colleagues may have to find a way of circumventing them.

Having thrown everything but the kitchen sink at investors today, it looks like the kitchen sink was precisely what they were after. [Link]


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