The ECB delivers a strong QE

As widely expected, at today’s monetary policy meeting the ECB announced the future purchase of government bonds (QE). The program is bigger than expected: it will amount to purchases of EUR 60 bn a month (including the existing CBPP and ABSPP). Moreover, the ECB also reduced the rate of the six TLTROs in existence by removing the 10bp spread over the MRO rate in the first two TLTROs. Regarding standard measures, the central banks left the key policy rate unchanged at 0.05% (together with maintaining interest rates on the marginal lending facility and the deposit facility). Mr. Draghi justified the program by pointing to the persistence of weaker-than-expected inflation, stating that the degree of current monetary accommodation was insufficient to address the risk of too-prolonged a period of low inflation. Mr Draghi clarified that the Governing Council (GC) had been “unanimous in stating that the asset purchase programme is a true monetary policy tool in a legal sense". On the inflation outlook, the GC will continue to closely monitor medium-term risks, yet stating that after today’s measures, the expect that downside risks to economic outlook should diminish.

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