Draghi nears to extend QE beyond March 2017

The European Central Bank (ECB) last week bought € 11.14 billion worth of government bonds in the week to Sept 2 as part of the Quantitative Easing program, it took the total it owns to 1 trillion euros. Including corporate, covered and asset-backed bonds, last week’s ECB purchases came in at 13.75 billion euro.This was announced by the ECB itself.

The ECB’s decision-making body will meet again on Thursday and Mario Draghi might announce the extension of the duration of QE, which officially should end in March 2017, already extended by six months.

According to estimates by Credit Agricole, the ECB will have already taken more than half of the universe of eligible debt by the end of the year, thus forcing the Board to change the EQ settings in an attempt to continue to achieve the € 80 billion per month as a purchasing target. 

The market is undecided on whether Mario Draghi ads extension of QE by 80 billion euro per month. The program has a deadline in March 2017 but the markets are convinced that Draghi will announce an extension at the next meeting, so-called Q3, or at the latest in December.

“Conditions to withdraw monetary stimulus will likely not be met next March,” said Kristian Toedtmann, an economist at DekaBank in Frankfurt. “There is no point in postponing this decision.” The weak PMI scores, which still came in above the crucial 50 mark which separates growing economies from contracting ones, nevertheless "fuels concern over the stuttering Eurozone growth," according to Howard Archer of IHS Markit.