The ECB finally launched the QE
The question that many investors could make to them self is: Why so late? Why for last?
In fact the other major central banks Fed, Boj, BoE, have launched similar QE many years ago and some of them has already finished the process creating millions of jobs. Let’s hope that the saying of Jesus: Blessed are the last because shall be first, this time could be appropriate.
So finally, the ECB starting from today 11.15 together with the national branches, will buy Government Bonds, European Institutional bonds, Covered Bonds and Abs (asset backed securities). This process will go on for as long as the inflation will reach the target of the ECB, close but less than 2%.
The ECB is going to buy 60 Billion euro per month of these financial assets (45 bln government bonds and the remaining other assets). Mr. Draghi has declared that will be purchased at least 1.140 Billion euro of assets till September 2016. But the big news is that the central bank is going to buy only investment grade bonds and this means that the bonds of Greece and Cipro will be omitted.
This extraordinary monetary policy is used when every other instrument has failed on reaching the central bank targets. The ECB hopes to see the same experiment that happened in other major economies like US and Great Britain and less what happened in Japan.
Already we have seen that only the announcement of the QE has had a big effect on the euro-zone economy. First the Euro depreciation and second the drop on long term rates of peripheral government bonds.
Now the investors expect to see other effects on the macro-economic indicators, first of all, the inflation to rise from the actual negative level. Many investors believe that the overall result of the ECB policy, will be much similar the Japan than to the US and this because the European economy is less dynamic than the US one.
Europe needs not only the QE but also structural reforms, reforms on the labor markets, deregulation, concentration in many sectors and above all a much bigger federal budget and federal union.