The ECB seems unlikely to announce any new policies this month as it continues to purchase small quantities of covered bonds and prepares to buy asset-backed securities. With the risk of deflation growing, President Mario Draghi may confirm speculation that the ECB is also considering buying corporate bonds. And we suspect that government bond purchases will ultimately be needed to ensure an expansion of the bank’s balance sheet large enough to exert meaningful upward pressure on inflation. But these policies will probably take time to come to fruition given opposition in Germany and elsewhere.
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