ECB and national central banks start buying bonds as part of QE
Print Edition
THE European Central Bank along with the national central banks of the eurozone yesterday started buying bonds as part of a long-awaited purchase program to kick-start inflation and stimulate growth in the single currency area.
“The ECB and Eurosystem national central banks have, as previously announced, started purchases under the Public Sector Purchase Program,” the ECB said via the micro-blogging site Twitter.
Details about the size and makeup of the purchases were not immediately available.
ECB chief Mario Draghi had announced last week that the central bank would officially launch yesterday its bond purchase program known as quantitative easing, or QE.
Under the program, central banks plan to buy around 60 billion euros (US$65 billion) of public and private bonds each month at least until September 2016.
The move comes as traditional efforts to boost sluggish economic activity in the 19-nation eurozone have been exhausted through interest rate cuts that have brought borrowing costs to nearly zero.
The ECB is also turning to QE as the eurozone faces growing threats of deflation, in which falling prices lead consumers to put off purchases on hopes they will drop further, sparking a damaging cycle of falling production, job creation and prices.
At the ECB’s policy meeting last week, Draghi insisted that the QE program, combined with the series of other liquidity measures, was already having a positive effect, bringing down borrowing costs for firms and households alike.
His confidence was backed up by an upward revision of the ECB’s growth forecasts.
But analysts said it was too early to gauge the effect of the purchases just yet.
The effect “is unlikely to become obvious on day one of the purchases. That is more likely to be a question of months,” said Commerzbank analyst Ulrich Leuchtmann.
Analysts expressed skepticism as to whether the QE program would really have the positive effect that the central bank hopes.
“(We) doubt very much that the new policy will prompt a meaningful economic recovery or counter the threat of deflation as the ECB hopes,” said Capital Economics economist Jennifer McKeown.
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