At least it is right now
The ECB Coeure had an interesting speech this week that hasn’t gotten enough attention. It was all about the effects of the Asset Purchase Programme — the central banks QE program.
Keep in mind that Coeure is a leading candidate to take over the ECB from Draghi. In the speech, he emphasizes the stock of purchased assets and how that is continuing to stimulate the eurozone. That’s not a big surprise but he also notes how it’s helped to suppress volatility.
He shows this via the bund:
Coeure estimates that bund volatility on economic news is down 20% because of QE.
He frames this as a good thing:
“What stock effects do is shield financial conditions from unwanted tightening forces and thereby help preserve the financial conditions that are needed to ensure a sustained convergence path of inflation towards levels that are below, but close to, 2%.”
That might be right but it’s not a good thing for trading. Volatility in FX is making the market tougher.
Looking ahead, I see this as an indication that Coeure is unafraid of introducing more QE or other policy experiments the next time a downturn hits.