ECB begins buying asset-backed securities

The European Central Bank (ECB) has started buying asset-backed securities in an attempt to encourage banks to lend and boost the stagnant economy.

"Following publication of legal act on the implementation of the ABS purchase programme, the Eurosystem has started the purchases on 21/11/2014," the ECB said on Twitter.

The announcement comes after President Mario Draghi said earlier on Friday in Frankfurt that the central bank was ready to expand its asset purchase programmes if inflation remains too low for too long.

“We will continue to meet our responsibility—we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us,” Draghi said in a speech to a banking conference in Frankfurt.

Barclays said: "Altogether, this implies that we are getting closer to the point at which the ECB may decide that one of the contingencies for further substantial action has been triggered. This could as early as December if the November CPI estimate (to be released next week) surprises to the downside (cf 0.3% y/y after 0.4% y/y in October).

"However, we consider it somewhat more likely that the announcement to also purchase government bonds will come in Q1 next year (our baseline) - either on 22 January, or 5 March when the Governing Council (GC) meets on monetary policy, according to the new six-week schedule."

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