Should the ECB go quantitative?

Many commentators either complain that the European Central Bank has not followed the FED, the Bank of England and the Bank of Japan on the Quantitative Easing (QE) path of purchasing very large amounts of securities or, more kindly, advice the ECB to go that way, to more forcefully fight the risk of too low inflation [1].

…and what about the other side of the pond?

While on this side of the Atlantic the ECB was reacting more quickly than expected to the much weaker inflation prospects, I was in the US trying to better understand what is happening over there in the monetary area.

On the basis of the talks I had, I came back with a number of thoughts, which were not necessarily shared by my interlocutors but were stimulated by the discussions I had with them.

Has Bernanke provided a helping hand to Draghi?

In a previous post I stressed the tug of war between the Governing Council of the ECB and the money market: the former has a unanimous intention to keep the monetary policy stance constant or looser, the latter seems well poised to increase interest rates.

In this tug of war, Bernanke has been seen by some as having started to pull on the ECB side with the utterly surprising Federal Open Market Committee (FOMC) decision not to "taper" the 85 billion of monthly purchases of bonds by the FED.

Feydeau, Bernanke and Draghi

Georges Feydeau was a master in his theatre pieces to make actors enter and exit doors, as in a ballet, causing great laughter in the audience.

Also Bernanke and Draghi are busy with exits, albeit in opposite directions and causing much less laughter.

Bernanke started communicating to the market that it should not expect the FED to always ease further and that before too long it should slow down and eventually exit from adding to its portfolio of securities.