ECB's balance sheet total passes €7 trillion

The ECB's balance sheet total recently passed the €7 trillion and is therefore half the size of the year at the beginning of this year. Support programmes such as the purchase of government bonds and liquidity support for banks caused this gigantic increase. For example, the central bank has already bought a total of €3.9 trillion in bonds, of which €750 billion is under the new PEPP program.

In addition to buying government bonds to bring down interest rates and interest rate differentials, the central bank also provides a lot of liquidity support to banks. These represent about a quarter of the total assets of €7 trillion. The central bank also saw the value of its gold holdings increase this year. At the beginning of this year, that stock was still worth €475 billion, due to the higher Gold price it is now €559 billion.

Central banks go into overdrive

In addition to the ECB, many other central banks have also further stretched their balance sheets this year. The Federal Reserve, the Bank of England and the Bank of Japan also announced new asset purchase programs. They also buy billions worth of bonds to keep interest rates low. In doing so, they help governments to finance huge budget deficits, which are the result of new support measures.

Central banks' balance sheet totals are expected to rise even further next year. The Fed has announced that it will buy unlimited government bonds if necessary, while the ECB has recently announced its support programme Expanded to €1.85 trillion. This means that Lagarde can still buy more than €1 trillion in government bonds and that interest rates can be lowered even further.

ECB balance sheet total at record high

This contribution was made from Geotrendlines