The European Central Bank has left rates unchanged, as expected, in its meeting Thursday.
Draghi is explaining the ECB's latest decision, and giving some details of their new asset purchases scheme:
- Covered bond purchases will begin this month, and asset backed securities purchases will begin this quarter.
- The weakening growth momentum and inflation outlook in the Eurozone warrant two years' worth of purchases.
- The governing council is unanimous in its commitment to use further unconventional mechanisms if the outlook worsens (this means QE is still on the table)
- Draghi says it's "hard to give a figure" on the purchases because the ABS and covered bond programmes overlap with the disappointing TLTRO bank credit policy. Another announcement on this is coming at 10:30 a.m. ET.
- Draghi has "decided to include countries that have a rating below BBB-" in the purchases programmes. That means Greece and Cyprus will be included, as the Financial Times suggested.
- "We did a lot of things since June. We did a lot of unprecedented things." Draghi is cheering the ECB's actions over the summer, but says "let's see" over sovereign bond purchases (QE).
- He adds that there's "no great bargain" between the ECB and national governments, with monetary easing in exchange for major structural reforms.
The central bankers are in Naples, Italy, to announce their latest monetary policy decisions.
The ECB is expected to lay out the details of the asset-backed securities and covered bonds it plans to buy. The purchasing plan "may include bundles of Greek and Cypriot bank loans with 'junk' ratings, a move that is likely to be unpopular with Germany,"The Financial Times said.
The ECB is looking to bring back its balance sheet to around €3 trillion ($3.8 trillion), which would require an increase of around €1 trillion ($1.3 trillion) from where it currently stands. The size of the purchases announced today will provide a good indicator of whether the central bank can achieve that.
A Reuters poll of Eurozone money market traders suggested that €200 billion ($252.7 billion) in ABS and covered bond purchases are expected. Jefferies' Marchel Alexandrovich expects that a smaller announcement of €80-100 billion ($101-126 billion) purchases would be enough “to signal a serious commitment.” Societe Generale analysts are expecting an announcement more in the range of €130-150 billion ($164-189 billion).
Draghi will likely field questions about quantitative easing, although Gennadiy Goldberg, a strategist at TD Securities, told the FT that the ECB is not expected to announce any major stimulus measures at Thursday's meeting.
The meeting is in Naples today, a part of Italy that has been hit particularly hard by the crisis. There are some sizeable protests, which you can follow on Twitter with the #BlockBCE hashtag.
SEE ALSO: Barclays Is Calling It: The ECB Is About To Finally Join The QE Party