European Central Bank meets to discuss monetary policy options
The European Central Bank (ECB) meets today to deliberate on further economic stimulus for the Eurozone.
With the general European economy expected to contract by 8-12% in 2020, the ECB will decide whether to implement a new round of quantitative easing (QE) debt purchases. European policymakers have already passed a $840 billion Pandemic Emergency Purchase Program as part of a larger $2 trillion proposal. If today’s stimulus measures are passed (which could expand purchasing funds by an additional $400-$850 billion), the ECB will likely begin large purchases of below investment-grade corporate debt, EU budget deficits could be boosted by 8% and sovereign debt could reach record levels throughout the bloc.
The ECB seeks to combat deflation and jump-start European growth. However, with interest rates already negative and central bank intervention rapidly expanding, the restorative power of monetary policy may have reached its limit. Investors project a decade of feeble continental growth, and with nations like Germany expressing an unwillingness to increase spending, it’s unlikely that ECB policies will be able to revitalise a stuttering economy.
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