With cat out of the bag, to sterilize or not to sterilize?

While the WSJ is now reporting that “many ECB members were surprised by Draghi’s comments suggesting new bond buys,” the cat’s out of the bag so now there is just the question of what they announce on Thursday. From the BN story earlier, the ECB is not close to agreeing to giving the ESM a bank license just yet so the focus will be on the ECB buying bonds in the secondary market alongside the EFSF/ESM buying bonds in the primary market, exactly what the French newspaper reported this morning. The ECB will then have to decide whether to continue sterilizing their bond purchases as they did with the 200b+ euros they’ve bought over the past few yrs or will they go the way of the Fed, BoE and BoJ and do full on QE. We don’t know which way Draghi wants to go on this latter point but the Germans certainly won’t agree to QE right now.

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