The Governing Council of European Central Bank (ECB) is set to pump at least €1.1 trillion (£834bn) into the eurozone economy and announced an expanded asset purchase program amounting to €60bn.
The program is aimed at fulfilling the bank’s price stability mandate and will see the ECB purchase sovereign bonds issued by euro area central governments, agencies and European institutions to its existing private sector asset purchase program.
Asset purchases are expected to provide monetary stimulus to the economy in a context where key ECB interest rates are at their lower bound and further set to ease monetary and financial conditions.
According to ECB, the program will encompass the asset-backed securities purchase programme (ABSPP) and the covered bond purchase programme (CBPP3), both of which were launched late 2014.
The purchases are proposed to be carried out until at least September 2016. Through the program, the Governing Council will be able to resolve to meet its objective of price stability in an unprecedented economic and financial environment.
The Governing Council retains control over all the design features of the program as regards the additional asset purchases, while the bank will coordinate the purchases, safeguarding the singleness of the Eurosystem’s monetary policy.
It has also been decided that purchases of securities of European institutions will be subject to loss sharing.
The ECB will own 8% of the additional asset purchases, which implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.
Image: ECB construction site with the twin tower. Photo: courtesy of Epizentrum