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3 Mar 2015
ECB QE: Will it work? - ING
FXStreet (Guatemala) - Carsten Brzeski, Chief Economist at ING Bank explained that the crucial question remains whether QE will actually help beyond the pure psychological announcement effect.
Key Quotes:
"In our view, QE could have at least two important effects: a demand effect and a crowding-out effect. The demand effect should lead to excess liquidity and lower bond yields."
"The crowding-out effect is enhanced by the negative deposit rate, pushing banks to search for yield. The search for yield should also push investors into non-euro-denominated assets, thereby weakening the euro."
"The latter remains, in our view, the most direct impact. The most pressing issue is whether market participants are really willing (or able) to sell their bonds to the ECB given that regulatory requirements do not always make it easy to join the hunt for yield."
Key Quotes:
"In our view, QE could have at least two important effects: a demand effect and a crowding-out effect. The demand effect should lead to excess liquidity and lower bond yields."
"The crowding-out effect is enhanced by the negative deposit rate, pushing banks to search for yield. The search for yield should also push investors into non-euro-denominated assets, thereby weakening the euro."
"The latter remains, in our view, the most direct impact. The most pressing issue is whether market participants are really willing (or able) to sell their bonds to the ECB given that regulatory requirements do not always make it easy to join the hunt for yield."