More QE not as simple as it sounds for ECB

In relative terms, the ECB's current quantitative easing programme appears modest. Whilst the BoJ's total asset purchases equate to 64% of GDP, and the Fed's 25%, current asset purchases in the Eurozone amount to around 11% of GDP, notes HSBC Bank. This alone would indicate relatively simple expansion of the ECB's QE program, should unwanted EUR strength emerge from a post-hike weakening of the USD. 

Unfortunately for the ECB, things are not quite so clear cut. No other central bank engaged in QE must consider more than one sovereign, leaving the ECB constrained by self-imposed technical restrictions. The ECB's bond holdings cannot exceed 33% of the total European market. For new bond issues, it is able only to purchase 25% of bonds with Collective Action Clauses (CACs), and 33% of those without (although that latter limit was upped from 25% on 3 September, indicating some flexibility). 

Corporate bonds are currently off-limits, and bonds purchased must have a minimum BBB- credit rating. Furthermore, there exists a pool of eligible financial institutions from which bonds can be bought (though this pool is easily widened), and the ECB cannot buy any bonds that are yielding less than -0.2%. 

Finally, the ECB must adhere to the 'capital key', and allocate 25.6% of its monthly purchases to the Bund market. These rules rule the ECB's policy. The ECB will find it extremely difficult to ignore or find a way around most of these constraints, says HSBC Bank.