23rd January 2015

Economic Policy: ECB announces €1.1 trillion QE program

In a largely expected move, the Governing Council of the ECB approved on 22 January a massive quantitative easing program. Despite opposition from the German members of the Governing Council, the executive of the bank adopted the decision by overwhelming majority. The ECB and the central banks of the eurozone countries will buy government bonds on the secondary market from March 2015, worth €60 billion a month. The program is not limited in time and will not be terminated before September 2016. The move comes after the announcement of the inflation for last quarter. Although pulled down mostly by the falling prices of oil, eurozone inflation dropped below zero for the first time since 2009 - it reached -0.2%. Experts expected the QE announcement and mostly welcome it, as well as its scale, that is reportedly larger than expected. At the same time, though, they point out, that QE is a last-resort option. With interest rates close to zero and other programs supplying liquidity to the market not working enough, the ECB had very little options left. The program is designed to tackle the deflation and to provide an impetus to the eurozone economy by providing in abundance cheap money for investment. According to the ECB President Draghi, the program will continue until the inflation is well on the trajectory to reach the “below, but close to 2%” inflation target of the central bank.

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Members of the American Chamber of Commerce in the Czech Republic