Unanimity to expand the balance sheet

Summary

As expected, at today’s monetary policy meeting the ECB left the key policy rate unchanged at 0.05% and took no additional steps on non-standard measures. However, the statement includes two important messages in terms of signalling. First, the introductory statement includes a reference on the balance sheet expansion, which “is expected to move towards the dimensions it had at the beginning of 2012”. Thus, this fact confirms that the central bank has a clear target for the expansion and, more importantly, the Governing Council’s (GC) unanimity on this. Later, at the Q&A session, Mr Draghi also clarified that when the GC referred to getting back to 2012 levels it meant that the balance sheet is expected to return to the level in March 2012 (after the second 3Y LTRO was held), which implies an increase in the balance sheet of around EUR1trn. Second, in order to reinforce its commitment and readiness to do more, the central bank said that it has asked the staff and relevant committees to prepare further measures to be implemented, if needed.

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