InvestmentsSep 4 2014

Draghi unveils asset buying programme

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Mario Draghi has confirmed the European Central Bank will start buying a broad portfolio of repackaged bundles of loans known as asset backed securities, in its latest move to try and fend off the threat of economic stagnation across the eurozone.

The announcement of the ABS programme at Thursday’s press conference had been widely expected, after the ECB President openly acknowledged in late August that markets had started to doubt the central bank’s ability to return inflation back to its 2 per cent target.

Mr Draghi said the ECB would buy “simple and transparent” ABS backed by loans to the private sector, as well as announcing a covered bond buying programme, plans that he said would have a “sizeable” impact on the bank’s balance sheet.

The two programmes will be launched in October, with details released after the ECB’s meeting next month.

So far during Mr Draghi’s speech, he has has revised down marginally the inflation forecast for 2014 from 0.7 per cent to 0.6 per cent but left the predictions for 2015 and 2016 fixed at 1.1 per cent and 1.4 per cent respectively.

Growth figures for this year and next year have also been revised down slightly with 0.9 per cent growth expected this year, 1.6 per cent in 2015 and 1.9 per cent in 2016.