According to a January 20th article (updated Jan. 21) from the Wall Street Journal, the European Central Bank is set to approved a QE program that will buy €50 billion ($58 billion) dollars worth of assets a month for at least a year. The €600 billion ECB QE program is somewhat larger than most analysts had been anticipating.
An ECB spokesman had no comment on the story when contacted by the WSJ.
Financial markets swung back and forth as investors considered the proposed QE. European stocks rallied at first, and the euro dived before moving slightly higher.
€50 billion a month is recommendation of ECB executive committee
The executive board of the ECB had a long meeting Tuesday to finalize the proposal, which will form the basis for discussion by the 25-member governing council on Thursday. Of note, the final number and other details are subject to change until the full board votes on the plan.
The executive board’s proposal makes it clear that the ECB plans to more aggressively than financial markets and most analysts have anticipated. Most recent analysts have been suggesting around €500 billion for the ECB QE program, but the board’s proposal is for at least €600 billion and potentially much more.
Background on ECB QE
The ECB has been hinting for a number of weeks that they are planning to announce the launch large-scale purchases of government bonds at their January 22 meeting. With interest rates near zero and cheap loans to banks not causing any inflation, an ECB QE program is about the only stimulative option remaining.
Consumer prices were off by 0.2% in December on an annual basis in Europe, the first decrease since 2009 and well below the ECB’s inflation target of just under 2%.
Several other major central banks (including the Federal Reserve, Bank of England and Bank of Japan) undertook quantitative easing programs to reduce long-term interest rates and stimulate their economies following the financial crisis. The ECB has had until now refrained from this measure, trying to get by with just interest-rate cuts and loans to banks as a means of increasing new credit to the economy.