Comments from ECB VP Vitor Constancio highlight that adopting credit easing was motivated by serious concerns over low inflation at a time when the economy is still weak and fragile.
At the October meeting Draghi pointed to a third phase in the evolution of lowflation where the impact of high unemployment and weak demand was seen having a wider dampening effect on prices.
Constancio sees a potential of €400bn of ABS and €600bn of covered bonds as qualifying for ECB purchases. But this is theory and in practise the ECB will not be able to get to this theoretical amount; just take a look at the difficulty the ECB had in its second covered bond purchase programme.
The ECB has not provided a concrete figure as to how much the ABS, CB, RMBS or TLTROs will contribute individually to expanding its balance sheet.
Given the uncertainty involved this is understandable but the key point to takeaway is the ‘whatever it takes’ attitude to increasing the balance sheet back to early 2012 levels. If existing policies are insufficient then the ECB will look to adopt full blown QE in H1 2015.