viernes, 7 de noviembre de 2014

viernes, noviembre 07, 2014

Heard on the Street

The ECB’s Numbers Game

Draghi Confirms Intent to Expand Balance Sheet

By Paul J. Davies

Nov. 6, 2014 12:58 p.m. ET


European Central Bank President Mario Draghi confirmed he expects the central bank’s lending and bond-buying policies to grow the balance sheet by almost €1 trillion. Bloomberg News  


Mario Draghi finally has a number. He’s just not quite ready to say how he will hit it.

The president of the European Central Bank confirmed that he expects its lending and bond-buying policies to grow the balance sheet by almost €1 trillion ($1.25 trillion). This is roughly what the market had believed Mr. Draghi meant in vaguer comments at previous monetary policy press conferences.

Now it can be sure. The president formalized the target of getting the balance back to its size at the beginning of 2012 by finally inserting the line into his prepared remarks. Then, in later answers to questions, he was explicit that the reference date was March 2012, after the second round of the ECB’s long-term refinancing operation.

The balance sheet was just shy of €3 trillion then. It is just above €2 trillion now.

That, along with Mr. Draghi’s generally dovish tone, helped firm European stocks and push the euro even lower against the dollar. While modest, the gains continue to see markets doing the ECB’s work for it, meaning the central bank can still bide its time on even more aggressive actions like those unveiled last week by the Bank of Japan .

Also, in spite of, or maybe because of, reports of differences among council members about where ECB policy should be, the central bank’s November meeting produced “unanimous” support for Mr. Draghi’s approach from the governing council.

Unfortunately, still open is the tricky question of how the ECB is going to get to the €3 trillion mark. Markets have been underwhelmed by the idea that policies announced so far can do it. These have included direct lending from the ECB to national banks through additional refinancing operations and purchases of covered bonds and asset-backed securities.

Still off the table are actual purchases of sovereign debt, or outright quantitative easing. The ECB’s governing council did say, though, that it is united in its commitment to additional unconventional measures if inflation fails to rise from its stubborn low of just 0.4% in October. That was a marginal improvement on September’s 0.3%, but far from the ECB’s 2% target.

Yet such pledges are still just that. And the inflation number, rather than Mr. Draghi’s balance-sheet one, is the target the ECB really needs to hit.

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