ECB is having a harder time reversing years of massive asset purchases.

 A decade of quantitative easing (QE) has significantly expanded the ECB’s balance sheet and created a liquidity glut, leaving policymakers in a trap from which they are struggling to escape.

Given the scale of the ECB’s bond holdings, however, its approach to quantitative tightening (QT) seems downright homeopathic. 

At the current rate, bringing the asset-purchase program to zero will take roughly 15 years (and this does not even account for the fact that the ECB continues to reinvest all maturing assets purchased under the Pandemic Emergency Purchase Program).

The ECB’s hesitation to pursue a forceful QT policy thus fosters expectations that fiscal policies will continue to be expansionary, which will ultimately extend the period of too-high inflation. 

Otmar Issing Project Syndicate 7 June 2023

https://www.project-syndicate.org/commentary/ecb-qe-liquidity-trap-by-otmar-issing-2023-06

ECB’s €500 Billion TLTRO repayments and Italian Banks

https://englundmacro.blogspot.com/2023/06/ecbs-500-billion-tltro-repayments-and.html