Back
10 Dec 2014
Counting on the balance sheet – BNP
FXStreet (Barcelona) - Analysts at BNP Paribas note that the ECB has signaled that it intends to bring its balance sheet back to the level prevailing in early 2012.
Key Quotes:
“The balance sheet expansion is an instrument that has been used by central banks to overcome the Zero Lower Bound of policy rates and to signal an easier monetary policy stance. It also wants to see inflation back to target “without delay” and “as fast as possible”, to quote President Draghi, The rise in the base money will first depend on the success of the upcoming targeted long-term refinancing operations (TLTROs)”.
“We expect the next operation, to be conducted on December the 11th, to encounter strong demand, at the upper range of estimates. However, it is likely that the measures adopted so far (TLTROs, ABS and Covered Bond purchase programs), will not be enough to fully achieve the ECB’s balance sheet objective”.
“Under these circumstances the ECB would be forced to enlarge the list of assets it currently purchases”.
Key Quotes:
“The balance sheet expansion is an instrument that has been used by central banks to overcome the Zero Lower Bound of policy rates and to signal an easier monetary policy stance. It also wants to see inflation back to target “without delay” and “as fast as possible”, to quote President Draghi, The rise in the base money will first depend on the success of the upcoming targeted long-term refinancing operations (TLTROs)”.
“We expect the next operation, to be conducted on December the 11th, to encounter strong demand, at the upper range of estimates. However, it is likely that the measures adopted so far (TLTROs, ABS and Covered Bond purchase programs), will not be enough to fully achieve the ECB’s balance sheet objective”.
“Under these circumstances the ECB would be forced to enlarge the list of assets it currently purchases”.