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ECB sovereign QE could support inflation trends

Friday, January 23, 2015

Significance

The programme expands existing purchases of asset-backed securities and covered bonds with large-scale buying of bonds issued by euro-area governments, agencies and European institutions. Purchases will amount to a combined total of 60 billion euros (69 billion dollars) per month, starting in March. They will continue until at least September 2016 -- or until there is progress towards the central bank's medium-term inflation goal.

Impacts

  • The larger than expected size of the programme will be achievable thanks to partial risk sharing among national central banks.
  • Wealth effects will be smaller than in the United States and United Kingdom, as euro-area capital markets are less deep.
  • The QE programme will amount to 12% of euro-area GDP, while the US programme was larger, at 25% of GDP.
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