ECB: the status quo, for the time being - BNP

According to BNP Paribas economist Thibault Mercier, changing the parameters of purchase program provides the European Central Bank (ECB) with an opportunity to ease monetary policy to varying degrees, without necessarily increasing the pace of monthly purchases.

Key Quotes:

“The ECB maintained the monetary status quo while at the same time announcing an upcoming change in the parameters of QE. Concretely, it is a matter of determining which parameters of its securities purchase programme should be modified to cope with the inevitable shortage of German securities in the future, assuming rates hold at current levels.”

“Depending on the options that are chosen, changing the parameters of QE provides the ECB with an opportunity to ease monetary policy to varying degrees, without necessarily increasing the pace of monthly purchases. It appears the ECB wanted to hold onto this “card” for the year-end period, once there is much greater visibility over the scope of Brexit’s impact on European activity.”

“ECB were to announce an extension of QE, it would inevitably have raised questions about the technical constraints of its implementation, forcing the central bank to spell out its intentions in greater detail. Yet clearly the ECB is still working on a consensus view on this question.

Another possibility is that the monetary institution wants to give itself time to think things through. Depending on the options that are chosen, changing the parameters of QE provides the ECB with an opportunity to ease monetary policy to varying degrees, without necessarily increasing the pace of monthly purchases. It appears that the ECB wanted to hold onto this “card” until the year-end period, once there is much greater visibility over the scope of Brexit’s impact on European activity.”