Another silly headline that completely misses the point of monetary operations.
The ‘debt buying plan’ is a purely technical move to do what is called ‘offset operating factors’ as a means to hitting the ECB’s interest rate targets.
The quantity of securities offered to do this is entirely inconsequential. As always, for a central bank, the monopoly supplier of net reserves for its currency of issue, it’s about price (interest rates) and not quantities. And the only possible ‘inflationary impact’ is via the interest rate channels:
(FT) — The European Central Bank faced embarrassment on Tuesday after failing for a second consecutive week to neutralise fully the inflationary impact of funds it had spent buying government bonds to combat the region’s debt crisis. On Tuesday, the ECB was due to reabsorb €76bn – the total amount spent under the bond-buying programme so far. But banks only offered €62bn. Last week, the ECB had also failed to reabsorb the required amount. In total, such operations have failed five times in the past year.
The latest setback was the result of higher market interest rates, which deterred banks from parking funds at the ECB. It could fuel ECB nervousness about its bond buying.
(Bloomberg) — European services and manufacturing growth accelerated in April. A composite index based on a survey of euro-area purchasing managers in both industries rose to 57.8 from 57.6 in March, Markit Economics said. That’s in line with an initial estimate on April 19.
They call the above an acceleration, I suppose because it fell in March:
The euro-area services indicator fell to 56.7 from 57.2 in March, Markit said, below a preliminary reading of 56.9 released last month. The manufacturing gauge increased to 58 from 57.5. In Germany, which has fueled the region’s recovery, a manufacturing indicator rose to 62 from 60.9 in March, while a services gauge slipped to 56.8 from 60.1.
Note the ‘and government austerity measures’ didn’t make the headline:
(Bloomberg) — European retail sales declined the most in almost a year in March as higher oil prices and government austerity measures curbed consumer spending. Sales in the 17-nation euro region fell 1 percent from the previous month after a revised 0.3 percent increase in February. March sales dropped 1.7 percent from a year earlier. Among services companies, “expectations for their activity levels in 12 months’ time slipped for the second successive month to reach a six-month low,” Markit said in a report. German retail sales declined 2.1 percent in March from February, when they fell 0.4 percent, today’s Eurostat report showed. In France, sales dropped 1 percent. Spanish sales fell 1.4 percent, while Ireland saw a 0.6 percent increase.
