According to the WSJ , the ECB has been bullied into doing more QE. Thus far, the ECB buying your bonds has been a death knell — everything they touch goes above 10% — however if they are sufficiently determined, they may stabilise things. But, it’s going to have HUGE to achieve that end.
If they could get consensus, now would be the perfect time for a Euro-Bond. Yields are low, and there is a shortage of top-notch collateral in the world. They could finance this entire project with 3% money.
In other news, it seems the G7 finance ministers have hit the panic button – they have told the WSJ that they will also conduct a meeting and release a statement this morning.
So that’s the BOJ, SNB and ECB all expanding their balance sheet further to try to stabilise markets. It will be interesting to note if the ECB has sufficient credibility with markets to catalyse a QE-trade (equities, commodities and rates all rallying at once).
If they can’t get things started, my bet is on the BoE and Fed undertaking similar balance sheet expansions in due course.That ought to do the trick.
Once the dust settles, these actions are likely to deliver hotter EM economies, higher commodity prices, a higher AUD, and higher inflation.
That’s a devil of a problem for the RBA.