Starting March 2015, mainly because of inflationary dynamics that have been weaker than expected, the ECB announced a massive Quantitative Easing (QE) up to 60 billion euros per month until the end of September 2016, totaling 1140 billion euros within 19 months, that is the upper range of markets expectations. The purchase of public and private debt will focus on 2- to 30-year maturities and the plan is designed to avoid all monetary financing. 20 per cent of additional asset purchases will be subject to risk-sharing. These may include bonds with negative interest rates and inflation may even be under zero, at least very low for some time, warned the President of the ECB Mario Draghi.
Immediately after the announcement, the Italian and Spanish rates reached record lows and analysts agreed that the risks would likely decline in the euro area. Pursuant to the fall in oil prices, the QE should improve business profitability and foster households. It should also send the ECB’s balance back to its early 2012 level. As for its status, the ECB said it will be the same as other investors and decided to keep its key interest rate unchanged at 0.05 per cent. All this sounds very good for the financial markets though largely anticipated. However the ECB’s plan must not divert Europe from reforms, stressed German Chancellor Angela Merkel. Draghi echoed her words by reminding governments and the European Commission they must conduct “crucial structural reforms.”