Authored by Nick Kounis and Kim Liu via ABN AMRO,
Debate about the ECB’s stimulus options have continued to rage, with an equity purchase plan mentioned as a possibility
We think the ECB could legally buy ETFs that fit its requirements…
… but it would be controversial and we question the benefits
An ETF programme could total EUR 200bn, which would not be large compared to the overall QE programme
…and assuming a market-weighted allocation, it would benefit the core more than the periphery…
…while it is questionable whether it would have a major sustained impact on equity prices, economic growth and inflation
The risk of losses is higher for equities than investment-grade credit
Ultimately, we do not think that the ECB will follow other central banks and turn to buying equities via ETF purchases any time soon, if at all
Mario Draghi,
We consider whether the ECB will turn to equity purchases
The ECB stepped up its unconventional policy around the middle of 2014, by taking its deposit rate into negative territory. Early in 2015, it launched a large-scale QE programme focused on public sector bonds. Since then it has added regional bonds and investment-grade credit bonds to the mix. Despite the positive effects on financial conditions, the outlook for growth and inflation remains disappointing.