Who says the ECB can’t keep up with the Fed. As the euro crisis has caused liquidity for euro zone banks to dry up, the ECB has taken on the intermediation role. In essence, they have taken on the dollar liquidity function that the US money markets used to provide via its bank liquidity operations and currency swaps with the Fed.
Gavyn Davies has the chart:
My take on LTRO, the latest liquidity operation? It:
- "effectively guarantees low rates on Bunds (and Dutch bonds) out to three years"
- "just as I believe the Fed has already begun its third easing campaign via its more explicit cap in August, I think the LTRO is really the ECB equivalent of QE3"
The ECB of 2011 is to the Fed of 2008.
Source: ECB balance sheet sucked further into the crisis – Gavyn Davies, FT