ECB launches QE plan of EUR 1140bn
As widely expected, the ECB left the key ECB rates unchanged at today’s policy meeting and launched a full-blown QE programme. ECB president Mario Draghi announced an expanded purchase programme of EUR 60bn per month including the previous purchase programmes of ABS and covered bonds. The programme will begin in March and continue until September 2016 thereby totalling EUR 1140bn of asset purchases, which is slightly above the previously intended size of an balance increase of EUR 1000bn (see graph). The programme is open-ended, as it will be conducted until the ECB sees a sustained adjustment in the path of inflation, in line with its inflation mandate. The purchases will be in investment grade securities issued by eurozone governments, agencies and European institutions, and will be based on the national central banks share in the ECB’s capital key. Additional eligibility criteria will be applied to countries under an EU/IMF adjustment programme. Loss sharing will be applicable to the 12% share of purchases in European institutions securities and to the 8% ECB share of the extra purchases; thus, 80% will not be subject to loss sharing. We do not know the exact distribution between the intended new purchases of private and government debt. The ECB will buy debt with maturities between 2-30 years. Draghi said that the governing council did not have to vote on the new programme and there was consensus on the risk sharing approach, whereas a large majority (i.e., not all members) saw a need for new purchase programme now
