Frankfurt (Reuters) – The European Central Bank (ECB) has flooded the start of its extensive program of buying government bonds and other securities markets with around 60 billion euros.
In March was the volume, according to a spokesman from the ECB Tuesday at nearly 61 billion euros, if you counted together purchases of government bonds, mortgage bonds (“covered bonds”) and mortgage-backed securities (“ABS”). This is slightly above the target level of the monetary authorities, who want so help the economy in the euro area on the jumps. By April 3, the ECB bought government bonds alone for EUR 52.5 billion. Thus, the monetary authorities, however, her pace slowed slightly. For a week until Good Friday they acquired title for 11.5 billion euros, according to previously 14.7 billion euros.
The ECB had started their great flood of money to the banking system on March 9, , The total volume of the controversial program in Germany, which is technically known as “QE” (QE) is around 1.14 trillion euros. Per month, it provides for a total purchases of around 60 billion euros. Central Bank chief Mario Draghi will inspire the unconventional monetary policy step modeled after the US Federal Reserve lending by banks, which is intended to benefit the economy in the monetary area. The currently very low inflation in the euro zone is to be driven in this way back up and approach the ECB’s target of just below two percent. With minus 0.1 percent in March, inflation was last far from it.
MERSCH: IF WE PULL COULD WE PLAN ADJUST
The buy-back program will run until September 2016 – but in any case until the inflation rate corresponds again to the currency area to the ideas of the ECB. Governing Director Yves Mersch said that inflation will climb in the opinion of the Central Bank in 2017 to 1.8 percent. If necessary, the ECB might change its purchasing program also Mersch signaled in a pre-release interview with the “Börsenzeitung”. “But when we see that we cover, it would of course appropriate to ask whether we need to adjust our plan.”
According to program a maximum of 33 percent of the outstanding bond debt of a country can be purchased. In addition, only up to 25 percent of a single debt instrument must be bought. Bonds are admitted with a credit rating of at least “BBB-” – this is a tick above the so-called junk status, which warns investors against a high risk of failure. Greek and Cypriot bonds are currently not part of the program.
Returns many European government bonds have now fallen by the massive purchases on. For example, Spain has made money for the first time at an auction of short-term government securities [ID: nL6N0X426K]. The calculation of the ECB: When banks sell in the course of further decreasing returns government securities, they will then use released funds for more lending. Ultimately this is also likely inflation would increase again.
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