Draghi Has Two Weeks to Map ECB Plan That Won't Disappoint

When European Central Bank policy makers meet in Frankfurt from March 9-10, they'll consider whether negative interest rates and 60 billion euros ($67 billion) a month of debt purchases is enough to revive consumer prices. With another rate cut priced in by markets, the biggest question mark hangs over how to customize quantitative easing.

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Under the current plan, Germany may face liquidity constraints between April 2017 and March 2018, according to the Bruegel research institute in Brussels. If monthly QE is increased by 20 billion euros, the nation might run short as early as November. Gianluca Salford, a bond strategist at JPMorgan Chase Bank, estimates the limit under an expanded program may be reached between mid-2017 and autumn next year.

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Allowing central banks to buy other nations' public debt would also be a hard sell. It's unlikely a country such as Germany would find it acceptable to buy riskier bonds from elsewhere.

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The ECB might expand the asset classes eligible for QE, perhaps adding corporate bonds. The concern is that there may not be enough company debt available. According to Anatoli Annenkov, an economist at Societe Generale SA, "there's quite a lot of liquidity constraint already."

The central bank is even able to buy equities, he said. That would have to be in a "real emergency" because the central bank doesn't want to influence market pricing.