A Merkel ally is calling on the ECB to dial back its activist liquidity provision after the ECB inflated its balance sheet to gargantuan levels.
For all you Fed-bashers, the ECB balance sheet is now 33% the size of the Euro zone economy while the Fed’s paltry holdings equal just 19% of US GDP…
Central bankers try to ignore political interference but given that they are forced by circumstance to work more closely together than under normal circumstances, even Draghi may buckle under pressure from the European paymaster. Don’t expect any quick move to reverse policy but expect the ECB stay sidelined unless bank liquidity takes another turn for the worse.
