ECB To Add €60 billion Monthly Stimulus Through At Least Sept. 2016

draghiEuropean Central Bank (ECB) President Mario Draghi announced today during a press conference that the ECB will undertake an “expanded asset purchase program” that consists of combined monthly purchases totaling €60 billion through at least September 2016 but he said the program will remain open ended until inflation stabilizes across the 19 economies of the euro area.

The euro fell sharply on the news and is currently trading at 1.1474.

Draghi said that the ECB’s asset purchases are based on the “capital key” meaning that the asset purchases of sovereign debt will be in proportion to the amount of debt in each country of the 19 member monetary union.

Draghi explained that the ECB won’t purchase more than 25 percent of each bond issue or more than 33 percent of each issuer’s debt.

The economies in the euro area are faced with the threat of deflation, slow economic growth, and high unemployment across its borders.

In December 2014 inflation in the euro area registered in negative territory at -0.2 percent, the lowest rate recorded since September 2009, and down from a positive reading of 0.3 percent in November 14′ and 0.4 percent in October 14′.

That is well below the ECB’s inflation target of just under but close to 2 percent inflation.

By contrast in December 2013 inflation was recorded at 0.8 percent.

The unemployment level in the 19 countries of the euro area is currently at 11.5 percent.

As of November 14′ unemployment was highest in Greece (25.7 percent) followed by Spain (23.9 percent).

The ECB also decided today during its policy meet to leave its main interest rates unchanged at 0.05 percent, an historic low, in addition to keeping its marginal facility rate at 0.30 percent and overnight deposit facility rate in negative territory at -0.20 percent

-Johnathan Schweitzer      


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