Draghi is delivering what I believe has been widely expected. ECB bond purchases will not begin until a individual country requests help from the EFSF/ESM (who will buy bonds in the primary market) and he encouraged governments to be ready to activate them. He repeated that any ECB bond purchases will be within their mandate of price stability but Draghi raised its 2012 inflation forecast a touch to 2.5% from 2.4% and probably explains why he didn’t cut rates today. He said he will stop purchases if a country no longer needs the help or if they don’t comply with the conditions they agreed to. No exact amount of purchases will be outlined, thus they will be considered unlimited and they’ll only buy short term bonds. The purchases will also be sterilized fully and results will be published weekly but individual country specifics monthly. The new bond purchases will be pari passu to other private holders but doesn’t change the seniority of the bonds the ECB owns via their now defunct SMP program.
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