The biggest announcement this month came from the European Central Bank (ECB). Mario Draghi, President of the ECB, announced the lowering of their key interest rate by 0.1% and that the ECB will begin buying asset backed securities and covered bonds to boost liquidity in the private sector.
More details of the purchasing programme will be provided on October 2nd, but the market expects the size of the programme to be between EUR 500 billion to 1 trillion as the ECB aims to expand its balance sheet back to where it was in 2012. Some of the driving factors behind this surprise (or rather sooner-than-expected) decision have been the risk of deflation with preliminary Euro area inflation rate falling to 0.3% y/y for August and slowing GDP growth rates. In particular, q/q GDP growth for Germany (Europe’s largest economy) was at -0.2% for Q2, 2014.