ECB will Frontload QE in Summer

• 05.19.2015, 15:32
•  Europe,  World

Executive Board member of European Central Bank (ECB) Benoit Coeure announced that the Bank sets to increase its bond buying process in May and June explaining it by the fact that summer is a low-liquidity period of the year, Bloomberg reports.

Quantitative easing (QE) program has been launched by ECB since the March 2015 and it is going to work till the end of 2016. QE program has an intended volume of 1,1 trillion euros. The aim of the project is to push economic activities of euro area up and to bring the inflation to the EU ceiling at 2%. Only two months passed from the program's launch time the ECB faced difficulties in smaller euro area countries as their central banks were not able to find enough bonds to buy.

In addition, Coeure noted that the ECB is aware of seasonal patterns in fixed-income market activity: the traditional holiday period during summer time is characterized by lower market liquidity. According to him if there is need for  frontloading in the period  from June to  August it can be complemented by backloading in September when market liquidity is improved.

Coeure noted that higher purchase volume in the coming weeks is not related to the market volatility, and it is not an issue ECB is to be concerned for.

On the occasion he also added:

"It reflects a market correction, recreates two-way risk in the market and reflects the fact that, as our program takes effect, some of the more pessimistic assumptions of future growth and inflation trends are being revised."

According to him the extreme volatility in global capital markets that shows signs of reduced liquidity is not related to QE.

QE led to euro becoming undervalued against dollar and other currencies, which is good sign for export and overseas purchases. This proves  that the idea of Mario Draghi is working out: euro area economy demonstrates rise in production.