Bloomberg has leaked ahead of tomorrows ECB meeting that Draghi’s hyped up plan to buy bonds is not at all what Draghi had hinted. Instead any bonds purchased will have to be sterilized. In other words, no new money added to the system.
European Central Bank President Mario Draghi’s bond-buying proposal involves unlimited purchases of government debt that will be sterilized to assuage concerns about printing money, two central bank officials briefed on the plan said.
Under the blueprint, which may be called “Monetary Outright Transactions,” the ECB would refrain from setting a public cap on yields, according to the people, and a third official, who spoke on condition of anonymity. The plan will only focus on government bonds rather than a broader range of assets and will target short-dated maturities of up to about three years, two of the people said.
Most likely to be announced tomorrow.
Policy makers are deliberating on the plan today and Draghi will announce whether it has been agreed to at a press conference tomorrow.
..but any bond purchased by the ECB has to be sterilized.
To sterilize the bond purchases, the ECB will remove from the system elsewhere the same amount of money it spends, ensuring the program has a neutral impact on the money supply.