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7th November 2014 - European Central Bank - November Meeting Review
Major Indexes:
FTSE 100 6,551.15 (+0.18%)
Dax 9,377.41 (+0.66%)
CAC40 4,227.68 (+0.46%)
Yesterday saw the ECB have its November meeting.
Coming just after the European Central Bank had downgraded their growth prospects for both 2014, down from 1.2% to 0.8% and 2015 down from 1.7% to 1.1%; and after an announcement that inflation in the Eurozone had increased to 0.4% there was little expected in the way of major announcements.
What Mario Draghi did confirm was that the governing council of the ECB was unanimously behind do whatever was necessary to get the EU economy back on track, even if that involved unconventional means. There has been criticism of the President lately in that he is too quick to follow countries like the US, UK and China into huge stimulus programs and the main objector to QE in Europe is Germany. If Draghi can win over the Germans, we could see announcements in the very near future that the Eurozone will be in full Quantatitive Easing mode.
The ECB has implemented several programs to inject cash into the system. They are looking to double their balance sheet in an attempt to fix the crisis and low cost loans which have been made available to major European banks have not been taken up as quickly as many thought.
Last month the Central Bank started its covered bonds and other asset buying program. Covered Bonds are instruments backed by public sector loans or mortgages. The issue with this program is that the market is very small and this leads us to the ECB looking to target government debt bonds in the future. This is where Germany, the largest economy in the EU has raised its concerns stating that they do not believe that this is the way to fix the current crisis in the Eurozone.
It will be interesting to see what numbers the ECB posts next month when we have had a full cycle of it buying the covered bonds. Once we have this data we will be in a better picture to see whether the European Union needs QE, a la Federal Reserve style.
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