The false end of quantitative easing

Chart of European Central Bank’s balance sheet
The European Central Bank’s balance sheet has steadily increased after it adopted an alphabet soup of asset-buying programs in 2014-2016 (source: macpixxel for GIS)
  • The ECB will end its net bond purchases by the end of this year
  • However, euro-area growth remains hampered by corporate and government debt
  • This suggests rates will stay near zero as the ECB rolls over its maturing bond portfolio

On June 14, the Governing Council of the European Central Bank (ECB) came together for a policy meeting in Riga to make a long-awaited announcement: it could now envisage putting an end to its ultra-accommodative monetary policy, known as “quantitative easing” (QE).

The decision did not really come as a surprise. For months, Europe’s top central bankers had been urging ECB President Mario Draghi to shut down the controversial QE program. Now, for the first time, the ECB communicated a possible date – the end of September 2018 – for phasing out its nonstandard monetary policy measures. Net asset purchases could end as soon as January 2019.

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