After the European Central Bank opened its toolbox and deployed pretty much everything it had left, bar printing money, the question is if and when QE becomes a live possibility.
ECB chief Mario Draghi pointedly said at his monthly news conference that all policy options had not been exhausted.
German resistance to such a move will remain, however, and Draghi’s deputy, Vitor Constancio, has already intimated that it will take until late this year to judge whether the latest gambits have made a difference before moving onto the next stage.
Bundesbank chief Jens Weidmann is already out today saying the ECB has ventured onto new ground and that governments need to treat the move as a wake-up call to continue with economic reforms. He added that there was a risk that long-term inflation expectations could be de-anchored – ECB speak for deflation.
ECB policymakers Benoit Coeure and Yves Mersch, who can be reasonably said to represent differing ends of ECB opinion, both speak later today as does Finnish central bank chief Erkki Liikanen.
One to ponder: By no longer offsetting the government bonds the ECB bought back during the debt crisis by taking in an equivalent amount in bank deposits each week - non-sterilisation in central bank jargon – has Draghi essentially crossed the Rubicon in terms of creating money and does that mean the philosophical objections to full-on QE have been surmounted?