- Can gauge in Q1 if pace of balance sheet expansion is on track to return to early 2012 size
- If not we will have to consider buying other assets including sov bonds in secondary market
- Sov QE would be a pure monetary policy decision
- Inflation threatens to continue on the low side while low growth environment creates risks for fabric of euro area
- Buying sov bonds would influence inflation expectations and exchange rate
- Current stimulus is expected to to achieve ECB asset goal
- It is not the job of ECB to pressure governments
EUR/USD chalks up another ECB man priming QE. It comes with the same old ‘wait for the data/current stimulus results’ but there’s no doubt they’re ready to pull the trigger. It heightens the prospect of getting the full details at next week’s ECB meeting.
Update: In regards to detail, the ECB will consider buying sov debt proportional to the size of each member’s economy
On if the balance sheet is not expanded as expected he said;
“If not, we will have to consider buying other assets, including sovereign bonds in the secondary market, the bulkier and more liquid market of securities available. It would be a pure monetary policy decision, buying accordingly to our capital key, within our mandate and our legal competence.”
