ECB Does Bare Minimum

The ECB has done the bare minumum by pushing out its plans to withdraw liquidity.  Previously it was expected to take place in early Q1 and now it has been delayed to early Q2 at the earliest.  This is hardly a solution.  It kicks part of the ball down the road, but banks locked out of the wholesale market will remain locked out.     Trichet has also kicked the bal back to the finance ministers and while there had been speculation of a summit, but has been denied. 

Trichet says that the bond buying program continues.  That also means the operation is sterilized.  Unlike the BOE, BOJ and FED, the ECB never provided a target figure or total amount.  It is rather open ended.  In the first six months they bought roughly 67 bln euros.  In the first 1 month of QEII, the Fed has bought over $100 bln. 

The euro has ben punished by the disappointment and the next target is near $1.3050.