ECB still at the back of the pack

While the ECB made a number of announcements last week, the policies involved are not as bold as they might seem. The interest rate cuts were clearly tiny and the decision not to sterilise bond purchases made under the Securities Markets Programme provides a boost of just 1.7% of GDP.

While President Draghi claimed that the new Targeted LTROs could unleash €400bn of funds, we doubt that uptake will be anywhere near this big due to a lack of lending opportunities and the fact that banks will now be charged for their central bank deposits. Meanwhile, prospective ABS purchases will be limited by the small size of this market in the euro-zone.