ECB discord a two-edged sword
As usual, the Bundesbank remains opposed to the most aggressive measures taken by Draghi to loosen monetary policy. Buba Weidmann was particularly opposed the lowering of collateral standards, it was reported today.
From a bullish perspective, the discord suggests the ECB will halt the LTRO program (at least very long-term operations like the three year…) and is unlikely to lower the benchmark overnight refi from its present 1% level.
From a bearish perspective, the ECB now appears hamstrung to take further policy action if banking or sovereign debt woes reemerge as the European economy slows.
The bullish argument is probably a tad more compelling near-term given the relative European calm at the moment.