Yesterday, the ECB announced an extension of its quantitative easing (QE) programme that was started in March this year. Apart from extending QE for at least six months to March 2017, Mr. Draghi, the President of the ECB, announced a widened scope of the programme. Only certain types of assets are allowed to be bought as part of the QE programme. This included, so far, sovereign and supranational bonds, as well as asset-backed securities and covered bonds. Yesterday, the list of eligible assets was extended to regional and local government bonds. Why did the ECB do this?
Last week, the European Central Bank (ECB) announced the launch of a massive program to buy sovereign bonds of euro area member states. Although this decision has already received considerable public attention, it is not the first time that the ECB buys sovereign bonds. What is new is the scale on which the ECB will buy securities. In fact, 60 billion Euro worth of sovereign (public) and covered (private) bonds will be purchased per month between March 2015 and at least until September 2016.
There is in Europe a widespread contempt in judging the ECB’s current monetary policy decisions, almost as if virtually any economist, analyst, student or politician could fare better than a panel of respected central bankers. Continue reading →
Investors are watching with bated breath for the outcome of this week’s two-day round of hearings at the Federal Constitutional Court of Germany. In a case brought before the Court by the academic founders of the new “Alternative for Germany” political party among others, and whose petition was signed by 35,000 Germans , the Court has to judge on the compatibility of the ECB’s Outright Monetary Program with the German Constitution.