ECB to start QE soon after lifting growth outlook
Print Edition
THE European Central Bank will launch into quantitative easing next week having increased its economic growth forecasts for this year and next.
ECB President Mario Draghi said the first bond purchases with new money would take place on Monday.
The eurozone’s central bank has said it will buy 60 billion euros (US$66 billion) a month until September 2016 or until inflation is pushed back toward a target of close to but below 2 percent.
The ECB, which left interest rates on hold at record lows just above zero at its meeting off-base in Cyprus yesterday, lifted its growth forecast to 1.5 percent for this year, from the 1 percent it predicted in December.
For 2016, growth of 1.9 percent is expected, up from a previous 1.5 percent.
“The latest economic data, and particularly survey evidence available up to February, point to some further improvements in economic activity at the beginning of this year,” Draghi told a news conference.
“Looking ahead, we expect the economic recovery to broaden and strengthen gradually.”
An analysis of Reuters polls shows more than half the most important economic data reports from the eurozone since the start of the year have beaten the consensus forecast and many have topped the highest prediction.
Germany, Europe’s largest economy, has led the way.
Inflation, now running at -0.3 percent, is forecast at zero this year rising to 1.8 percent in 2017. That is sufficiently close to the ECB’s target to suggest money printing will not run beyond September 2016.
The ECB has a long way to go to convince markets its plans will be effective. Only half of the economists polled by Reuters think bond buying will help inflation rise toward the target of close to but below 2 percent, and half think the purchases will be extended.
There are tentative signs inflation has bottomed out.
The February reading of -0.3 percent was above forecasts, oil prices have rebounded from January lows, growth is picking up, and the euro hit a fresh 11-year low against the dollar overnight, boosting prospects for higher imported inflation.
“The risks surrounding the economic outlook for the euro area remain on the downside but have diminished following recent monetary policy decisions and the fall in oil prices,” Draghi said.
The ECB is keen to stay out of the political debate over Greece’s future, and Draghi signaled the bank would not allow a plea from Athens to be allowed to issue more short-term debt to get it over acute short-term funding problems.
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