BNP say the ECB will start QE this year:

  • Asset purchases are increasingly necessary in order for the ECB to meet its primary objective of maintaining price stability.
  • Inflation in the euro area has persistently surprised to the downside, eroding the safety margin against deflation.
  • Additional conventional policy easing will not deliver sufficient monetary accommodation for the price stability mandate to be met.
  • Thus, the ECB will reluctantly have to follow other central banks into balance sheet expansion via asset purchases.

They go on:

  • ECB will buy between €300 and €500 billion of bonds in the initial phase of an asset purchase program
  • Probably starts in H2 of 2014
  • Purchases will be of both private sector and government debt
  • Add that implementing the program will not be easy – getting agreement amongst 24 voters, legal obstacles (does the ECB have the mandate?)