We are not thinking of increasing our monetary base, expecting that through the workings of a stable multiplier, monetary aggregates will increase, thereby causing an upward movement in inflation, by whatever ways the traditional quantitative approach conceived. We decided on a Large Scale Asset Purchase (LSAP) mostly to be able to use several new channels of transmission of an expansionary monetary policy.
The increase of the monetary base and the total balance sheet is a consequence of these new types of monetary stimulus. By purchasing this type of long-maturity assets, we intervene directly on medium-term rates, we extract duration from the market, we provide liquidity directly to non-bank entities, and we open space in banks’ balance sheets for increasing credit.