BMO makes the case for ECB asset purchases:

The declining inflation rate in the Eurozone is problematic for the ECB. One tool they have yet to employ to battle disinflation is asset purchases. But due to institutional constraints – both owing to politics and capital market structure – a QE program like the FOMC’s is unlikely in the near term.

But as the chart shows, the falling balance sheet size corresponds directly with the falling inflation rate, so even if the transmission mechanism is unclear and complicated, the ECB is under increasing pressure to put the balance sheet to work.

(Matt)