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Draghi’s comments increased rather than decreased likelihood of more action - ING

FXStreet (Łódź) - Carsten Brzeski from ING comments on today's ECB monetary policy announcement, suggesting that the details of the ABS and covered bond purchasing programmes were incomplete.

Key quotes

"In general, the ECB refrained from answering two important questions on the ABS and covered bond purchasing programmes: will there be a country distribution and what will be the total volume?"

"Regarding the volume of all purchases, Draghi made the latest new soft target, the size of the balance sheet, a bit softer."

"He said that the 'potential universe' of all eligible ABS and covered bonds was 1 trillion euro."

"On top of that come the TLTROs. Returning the ECB’s balance sheet to its size of 2012 (which would require an increase of 1000 billion euro) was an instrument rather than a goal."

"The ECB obviously sticks to its current strategy of repairing the transmission channel of monetary policy. All measures are aimed at supporting the supply side of the credit economy, ie banks."

"At several occasions during the press conference, Draghi stressed that monetary policy alone could not restore growth in the Eurozone. He called several times for more (implementation of) structural reforms, the use of fiscal room for manoeuvre and demand-side policies."

"Whether this was another invitation for Eurozone governments to join another grand bargain, or just another desperate cry in the dark remains to be seen."

"The experience of the last years, however, tells us that the ECB’s advance payments have hardly ever been matched by equivalent government actions."

"In this context, the fact that Draghi mentioned the ECB’s unanimous commitment 'to using additional unconventional instruments' three times compared with only one time last month is in our view a clear signal that the ECB is determined to do more and even bolder action if necessary.."

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