The European Central Bank said it will start printing money to buy bonds next Monday and delivered a robust economic outlook that will make it hard to extend the plan beyond its envisaged Sept. 2016 end-date. The ECB is embarking on the programme of quantitative easing (QE) with a view to raising euro zone inflation from below zero back towards its goal of just under 2 percent, and to helping buoy economies across the 19-country bloc.
The ECB, which left interest rates on hold at record lows just above zero at its meeting off-base in Cyprus on Thursday, lifted its growth forecast to 1.5 percent for this year, from the 1.0 percent it predicted in December. ECB staff foresaw euro zone inflation rising from 0 percent this year to 1.8 percent in 2017, which would put it in line with the bank’s target of close to but below 2 percent.
“If these very bullish forecasts are met, there certainly won’t be more QE after September 2016,” said Berenberg bank economist Christian Schulz. “In fact, they might then start discussing normalising policy rates at some point.” But the bank still has a long way to go to convince markets its plans will be effective. Only half of the economists polled by Reuters think bond buying will help inflation rise towards the target and half think the purchases will be extended.
Recommended Content
Editors’ Picks
EUR/USD fluctuates near 1.0700 after US data
EUR/USD stays in a consolidation phase at around 1.0700 in the American session on Wednesday. The data from the US showed a strong increase in Durable Goods Orders, supporting the USD and making it difficult for the pair to gain traction.
USD/JPY refreshes 34-year high, attacks 155.00 as intervention risks loom
USD/JPY is renewing a multi-decade high, closing in on 155.00. Traders turn cautious on heightened risks of Japan's FX intervention. Broad US Dollar rebound aids the upside in the major. US Durable Goods data are next on tap.
Gold keeps consolidating ahead of US first-tier figures
Gold finds it difficult to stage a rebound midweek following Monday's sharp decline but manages to hold above $2,300. The benchmark 10-year US Treasury bond yield stays in the green above 4.6% after US data, not allowing the pair to turn north.
Worldcoin looks set for comeback despite Nvidia’s 22% crash Premium
Worldcoin price is in a better position than last week's and shows signs of a potential comeback. This development occurs amid the sharp decline in the valuation of the popular GPU manufacturer Nvidia.
Three fundamentals for the week: US GDP, BoJ and the Fed's favorite inflation gauge stand out Premium
While it is hard to predict when geopolitical news erupts, the level of tension is lower – allowing for key data to have its say. This week's US figures are set to shape the Federal Reserve's decision next week – and the Bank of Japan may struggle to halt the Yen's deterioration.