This week, the head of the European Central Bank Mario Draghi flies to Washington. Meanwhile, hanging over Europe remains a question to one trillion euros.
Lord Mario Draghi and his colleagues can use the meeting of the International Monetary Fund to confirm their intentions to start a new program of quantitative easing. However , apparently , still have not decided in what form the program will run , and what tools will be used . Such uncertainty and market participants are concerned about this Bloomberg reported citing analysts from Unicredit SpA and Deutsche Bank AG.
Mario Draghi is definitely ready for what is now possible new stimulus from the ECB will be under scrutiny . Just last week, the press leaked the information that in the fight against deflation ECB launch asset purchase program by 1 trillion euros. However , other members of the ECB , Yves Mersch and Jens Weidmann in his statements given to understand that the issue has not been resolved , and many details need discussion . In other words , they actually said that the final decision is still not, and it is unclear how this will be done at all asset purchase program . Uncertainty added ECB Governing Council member Ewald Nowotny , saying that swim may be the paper of the private sector , not government .
” All this talk of QE very nervous about the market ,” – wrote in his note to Erik Nielsen of UniCredit. “I think that the regulator would be glad to start something , as we all are excited about the new incentives. But QE is not inevitable . What will happen to the market if all of a sudden it becomes clear that it was only a semi- public discussion of possible tools and nothing more ? ” – he added .
ECB must fight deflation.
Mario Draghi will most likely face questions on this subject at the meeting of the IMF , which will be held in Washington on April 12 . It together with the chairman also fly Vitor Constancio , Peter Praet and Benoit Kouri .
Speech by Mario Draghi at a press conference after a meeting of the central bank gave the market the way for reflection. The phrase that the ECB Governing Council is unanimous in considering the tools that could be applied in the fight against the deflationary process is accompanied by an explanation that discusses , among other assets and repurchase program .
The market reacted immediately and the yield on Spanish five-year bonds at some point dropped even lower than the yield on similar U.S. securities – the first time since 2007
April 4 Bloomberg citing its sources wrote that the ECB is considering several options models QE.
A little earlier the same day the German edition of Frankfurter Allgemeine Zeitung reported that the regulator is considering buyback program by 80 billion euros a month for a year and came to the conclusion that it will help increase the amount of inflation from 0.2 % to 0.8 %.
According to the paper also examines the expansion of the credit program .
These models are just some of the options considered and evaluated , Coury said in an interview with Le Figaro. He also noted that the European Central Bank QE will differ from the Fed QE . Other representatives of the ECB said that while no decision there, and working groups involved in the ECB only study options .
“From theory to practice is a long way , and we are going to go ,” – said Yves Mersch .
It is also worth noting that in addition to technical problems , there is also the complexity of the political and legal issues . ECB prohibited direct funding countries.
About risks and disappointments market wrote Deutsche Bank analyst Peter Hooper : ” We believe that the central bank raised expectations so high that it would be forced to act . However, the high risk that the market may be disappointed.”