Photographer: Martin Leissl

If Size Matters, the ECB Is Still Falling Short

The new asset-purchase program is set to lag those of the Fed and other central banks

The European Central Bank joined the quantitative easing party last month, six years after the U.S. Federal Reserve got it going.

It still may not have bought much in the way of cheer, even as investors praised it for being larger than anticipated at 1.1 trillion euros ($1.26 trillion). Stretching out forecasts, Nomura International Plc economists led by London-based Jacques Cailloux reckon the assets purchased by the ECB will total about 6 percent gross domestic product by the end of 2015.

By contrast, the Fed's purchases will amount to 25 percent of GDP, just ahead of the Bank of England's 22 percent, even though both have shelved their bond-buying. The Bank of Japan is the runaway leader in the group, swallowing assets equivalent of 60 percent of GDP by the end of the year.

Source: Nomura International Plc

The disparity has Cailloux and colleagues predicting that the Frankfurt-based central bank may need to do more, with a program set to run at less than a third the pace of the Fed's.

"If you believe in the effectiveness of quantitative easing, the ECB's program will need to grow much more significantly before it has a macroeconomic impact," the Nomura team said in a report last week.

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