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ECB meeting preview

Global & Regional Focus Notes

05 Σεπτεμβρίου 2012

• In its upcoming meeting the ECB is expected to reveal details about the reactivation of its SMP program. We expect the ECB to focus on short term sovereign bond purchases in order to improve the monetary transmission mechanism and boost credit supply in the periphery. Such reasoning falls within the ECB’s mandate of financial stability and is expected to contain criticism of government financing.
• The ECB will most likely avoid the announcement of explicit caps, as they would reduce the flexibility and conditionality of its interventions. Instead, it is anticipated to defend implicit targets with ad-hoc purchases. In our view, large amounts of purchases as well as a clear renunciation of seniority status are essential for the new bond purchases to be more successful in stabilizing sovereign debt markets than the SMP has been so far.

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