2 Oct 2014
ECB's Draghi presents details of ABS and covered bond purchase program
FXStreet (Łódź) - Amid anti-austerity protests in Naples, where the Mario Draghi's post-monetary policy decision conference took place this time, the president presented the details of the ECB's ABS and covered bonds purchase programs, introduced at the September meeting.
According to Draghi, the duration of the programs will be at least two years. Purchases of covered bonds will start in mid-October, while ABS will be bought from Q4 2014. The programs should have a substantial impact on the central bank's balance sheet, the ECB head stated, are expected to strengthen forward guidance and support the broader economy.
Still, in case inflation remains at low levels for an extended period of time, the Governing Council is prepared to implement additional unconventional measures. This suggests that a full-blown QE program is still in the cards.
Mario Draghi pointed out that the Eurozone economic recovery momentum is slowing down, with risks titled to the downside. Inflation is still low and unemployment excessively elevated. Even though the new stimulus program should help get inflation back to the central bank's long-term target, Eurozone Member States should continue implementing reforms in order to prop up the recovery.
"Problems are not only structural. Unemployment is high. Unutilized capacity is sizeable. There is a need for demand policies," Draghi stressed.
During the Q&A part of the press conference Draghi clarified that the ABS purchase program will include countries with ratings below BBB-, such as Greece or Cyprus, although on teh condition that these ABS are adjusted for riskiness.
According to Draghi, the duration of the programs will be at least two years. Purchases of covered bonds will start in mid-October, while ABS will be bought from Q4 2014. The programs should have a substantial impact on the central bank's balance sheet, the ECB head stated, are expected to strengthen forward guidance and support the broader economy.
Still, in case inflation remains at low levels for an extended period of time, the Governing Council is prepared to implement additional unconventional measures. This suggests that a full-blown QE program is still in the cards.
Mario Draghi pointed out that the Eurozone economic recovery momentum is slowing down, with risks titled to the downside. Inflation is still low and unemployment excessively elevated. Even though the new stimulus program should help get inflation back to the central bank's long-term target, Eurozone Member States should continue implementing reforms in order to prop up the recovery.
"Problems are not only structural. Unemployment is high. Unutilized capacity is sizeable. There is a need for demand policies," Draghi stressed.
During the Q&A part of the press conference Draghi clarified that the ABS purchase program will include countries with ratings below BBB-, such as Greece or Cyprus, although on teh condition that these ABS are adjusted for riskiness.