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European Central Bank meets to discuss monetary policy options

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European Central Bank meets to discuss monetary policy options

ECB
Photo: Daniel Roland/AFP/Getty Images

The European Central Bank (ECB) meets today to deliberate on further economic stimulus for the Eurozone.

With the general European economy expected to contract by 8-12% in 2020, the ECB will decide whether to implement a new round of quantitative easing (QE) debt purchases. European policymakers have already passed a $840 billion Pandemic Emergency Purchase Program as part of a larger $2 trillion proposal. If today’s stimulus measures are passed (which could expand purchasing funds by an additional $400-$850 billion), the ECB will likely begin large purchases of below investment-grade corporate debt, EU budget deficits could be boosted by 8% and sovereign debt could reach record levels throughout the bloc.

The ECB seeks to combat deflation and jump-start European growth. However, with interest rates already negative and central bank intervention rapidly expanding, the restorative power of monetary policy may have reached its limit. Investors project a decade of feeble continental growth, and with nations like Germany expressing an unwillingness to increase spending, it’s unlikely that ECB policies will be able to revitalise a stuttering economy.

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