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Friday 2 December 2016

ECB reaches money-printing stimulus target in first month

Published 08/04/2015 | 08:07

Mario Draghi, ECB president
Mario Draghi, ECB president

The European Central Bank bought almost €61bn of government bonds and other assets in March, it said, just beating its target in the first month of a programme designed to revive the euro zone economy.

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The ECB has committed to buying 60 billion euros of assets a month with newly created money until September 2016, or longer if needed to get inflation back on track to hit its target of just below 2 percent.

Purchases of public-sector bonds started on March 9, while those of other assets such as covered bonds and asset-backed securities began earlier.

An ECB spokesman said that for March alone, net asset purchases reached 60.953 billion euros.

"QE is doing its magic," said ING economist Carsten Brzeski. "This is a very encouraging start and defies scepticism about whether they will make the target."

Weekly data earlier in March had already shown the ECB exceeding its purchase targets.

Figures for the week ending April 3 showed a fall in government bond purchases, but economists attributed this to reduced liquidity in bond markets in the run-up to the Easter holidays in western Europe, rather than a more permanent shortage of bonds.

Some economists had raised concerns that a shortage of bonds that met the ECB's purchase criteria could pose a problem.

Brzeski said the asset purchase data coincided with upbeat data on financing conditions and confidence, which suggested QE was succeeding in lifting morale in the euro zone.

But RBC economist Timo del Carpio said it was not possible to draw firm conclusions, either on the sustainability of the QE programme or its benefits.

"Over time they may choose to reduce the scale due to market liquidity conditions, but at the start of the programme they seem to have hit the ground running," he said.

The ECB said it bought 11.5 billion euros of government bonds in the fourth week of its programme, down from 14.7 billion euros in the third. Total purchases since March 9 stood at 52.555 billion euros.

The ECB said that in addition to the public-sector bonds, it had settled 64.670 billion euros in total covered bond purchases as of April 3, and 4.888 billion euros in purchases of asset-backed securities (ABS). Both those programmes were announced in September.

Reuters

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