Some economists expect the European Central Bank to restart quantitative easing later this year
firepower is sadly depleted. The interest rate on the reserves that banks hold with it is sub-zero; its quantitative-easing scheme has hoovered up assets worth €2.6trn —equivalent to over a fifth of the euro area’s. Even so, in June Mario Draghi, the bank’s boss, promised further stimulus if the economy does not buck up. Statistics published since then suggest little recovery. Cue much speculation about another attempt to revive growth.
Many expect an announcement at the bank’s meeting in September, along with updated economic forecasts. But its next gathering on July 25th could still surprise, or at least lay the groundwork for stimulus. With individual instruments nearing limits, it is expected to deploy a combination.Of late its weapon of choice has been guidance on the path of interest rates. It has promised to keep rates steady for longer, at least until mid-2020.
Banks complain that negative interest rates shrink their margins: they have to pay the central bank to hold their deposits, but fear that if they pass negative rates on, their depositors will withdraw their cash. Profits and lending both fall, preventing the rate from transmitting to the real economy. For now, thereckons it has not reached the “effective lower bound”—the point at which the expansionary effects of negative interest rates stop outweighing any costs.
Some economists therefore expect attempts to mitigate the negative impact of rate cuts by excusing banks from negative rates on some excess reserves. Even then rates may be not far off the lower bound. Analysts atThat limited space is why some economists also expect the bank to restartlater in the year. Daniele Antonucci of Morgan Stanley, a Wall Street firm, expects the bank to announce monthly purchases of government and corporate debt of €45bn.
Canada Latest News, Canada Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Will ECB walk or just talk as rate circus comes to Europe?The global march towards lower interest rates reaches Europe this week with the ...
Read more »
European stocks seen higher on hopes for a Fed rate cutEuropean stocks are set to open higher on Friday as market players increase their bets the U.S. Federal Reserve will cut interest rates this month.
Read more »
Fed's Rosengren not on board for rate cut: 'I think we should wait'Boston Federal Reserve President Eric Rosengren is lining up against an apparent push to cut interest rates, telling CNBC in an interview Friday that the central bank can afford to be patient as long as the economy holds up.
Read more »
US Treasury yields tick higher amid hopes of a Fed rate cutU.S. government debt prices were lower on Friday morning, after comments from a Fed official hinted at a rate cut.
Read more »
Dollar under pressure after Fed fuels bets on large rate cutThe dollar was on the defensive on Friday after Federal Reserve officials bolste...
Read more »
Fed's Rosengren doesn't see the case for a U.S. rate cutBoston Federal Reserve President Eric Rosengren on Friday pushed back against ex...
Read more »