ECB plans for bond purchase to boost the economy

European Central Bank is planning for a 500 billion euros ($591 billion) worth bond purchases. They have not decided on the specific class of asset , only AAA-rated debt or bonds rated at least BBB minus, the euro-area central bank official said. . A 500 billion-euro purchase program would take the ECB halfway toward its goal of boosting its balance sheet to avoid the deflationary threat. ECB is also buying asset-backed securities and covered bonds.

Euro-area consumer prices fell last month for the first time in more than five years. The euro traded 0.2 percent higher at $1.1811 at 4:16 p.m. Frankfurt time. The yield on Spanish 10-year bonds climbed 5 basis points to 1.72 %. Its Greek equivalent dropped to 10.1%

 Euro-area consumer prices fell on an annual basis last month for the first time in more than five years and ECB fears of a deflationary issues.  ECB intends to expand its balance sheet toward 3 trillion euros. Current balance sheet is about 2.2 trillion euros. Banks must repay more than 200 billion euros in loans early this year.

The far-left Syriza party continues to hold lead in polls ahead of Greece’s election scheduled on January 25th. This lead seems unlikely to be overturned in just two-and-a-half weeks as per the expert opinions. The firebrand Syriza leader, has been toning down his anti-European rhetoric. He now says no “unilateral” decisions will be taken on Greece’s obligations to its creditors, a signal that a Syriza government would not surprise markets with an immediate default. Mr Tsipras’s message to voters is simple: a promise to end four bleak years of austerity with a splurge of social spending.

QE will be a good news for the Europian Union as well as for the world markets. However as predicted in the previous posts Euro will be depreciating further.