EU: Central Bank Will Continue Quantitative Easing Next Year

Jon Banking, Economy, Fiscal Policies, Market Commentary

The European Central Bank (ECB) announced on Dec. 8 that it would extend its bond-buying program through December 2017 rather than end it in March as it originally intended. Starting in April, however, the bank will decrease its bond purchases from 80 billion euros ($85 billion) a month to 60 billion euros a month. The bank also announced it would keep its benchmark interest rate at zero.
The bank’s governing council said in a press release that the bond-buying program, known as quantitative easing, could be extended again if necessary. The institution also said it may expand the size of the program at any time if the eurozone’s financial outlook worsened. After the announcement, ECB President Mario Draghi said the bank would change how it buys bonds. Currently, the bank focuses on buying riskier bonds. But under the new strategy, it could start buying bonds issued by European countries with yields less than the ECB’s deposit rate (now at -0.4 percent), such as German short-term debt.

This post was published at FinancialSense on 12/09/2016.