Mario Draghi - "To Do Or Not To Do"

At its monetary meeting, the ECB kept the Deposit Facility Rate unchanged at -0.2% and the more important Refinancing Rate at 0.05%. Both were in line with market expectations.

 

The bombshell for the market, especially the currency market, came during the post meeting press conference. There ECB President Mario Draghi said that he expects the central bank’s balance sheet to rise toward early 2012 levels. The size of the current balance sheet is around 2 trillion Euro and the peak in June 2012 was 3.1 trillion Euro suggesting 1 trillion Euro of asset purchase. If the ECB buys that in a year that'll be comparable to the rate the Fed bought Treasuries/MBS during QE3 ($85 billion a month).

 

Again nobody is sure if Mario Draghi can pull that off especially given well-know opposition from the German Bundesbank. No bigger authority than former Fed Chairman Ben Bernanke said so. The next ECB meeting is on December 4 and we'll see what happens then.

ECB President Mario Draghi's Press Conference (Transcript of the Press Conference)