Nordea skriver: ECB: “Whatever it takes” still stands

Now that the dust has settled after the ECB’s second significant easing package within just three months, we come back with thoughts on how to read the ECB and what to expect from the ABS and covered bond purchases. A volume of purchases of EUR 700 to 1000bn can hardly be reached in these asset classes.

ECB policy makers must be very worried, if not close to desperate about the outlook for the Euro area economy. So worried that they risk losing credibility by cutting rates again after saying in June that they have reached the lower bound. At that time, Draghi left the door open for “little technical adjustments”. Buts let’s face it: The refi rate was cut to make the upcoming TLTROs more attractive. The deposit rate was cut to weaken the EUR. It was an easing of monetary policy – not a “technical adjustment” – against the backdrop of an economy that looks weaker than did three months ago. In a separate note, we elaborated on the market impact of the ECB’s easing package.