In a bold new move to stimulate the European economy and stave off deflation, the European Central Bank (ECB) has announced that it will begin buying corporate bonds and carrying them on the bank’s balance sheet as an asset. “Even our Federal Reserve didn’t go that far!” commented Dr. Lewis Spellman, Executive Vice-President & Macro-Economist for Beck Capital. “These actions by the ECB are unprecedented. They have entered a new dimension of stimulus. What is really needed is for European governments to take fiscal actions and meaningful labor market reforms, which would be very heavy lifting given their commitment to socialism” said Spellman. Analysts expect that the ECB will decide to extend their Quantitative Easing past 2017, when they meet later this year. “I wouldn’t be surprised at all, if the ECB extended. The important question is: how do they get off this policy train in the future? It will take an act of deftness, an act that they will need to prepare the markets for in advance, just as our Fed is doing” commented Spellman. For additional information on the ECB’s actions click here.
