Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Sweating: the European Central Bank

Posted by hkarner - 21. Juli 2016

Date: 21-07-2016
Source: The Economist

Out of puffMario Draghi must act again soon. Inflation in June was just 0.1%, way below the 2% target. GDP growth, 0.6% in the first quarter, probably slowed even before the Brexit blow. So quantitative easing (QE)—buying up to €80 billion ($88 billion) of bonds monthly—may be extended beyond March, or the ECB’s deposit rate, already -0.4%, cut further.

Few expect either today, but the bank’s president may hint at a shift in September, when the ECB revises its economic forecasts and after it has had more time to ponder Brexit (the Bank of England held rates steady last week). He may also indicate tweaks to constraints on QE, which limit bond purchases to one-third of an issue and rule out anything yielding less than the ECB’s deposit rate. Within two months, reckons Jefferies, an investment bank, the ECB will run out of German government bonds to buy. Something’s got to give.

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