Wednesday, January 21, 2015

Europe Looks to QE

Just after America's bout of quantitative easing has come to an end, the European Central Bank is expected to embark on QE for Europe at its meeting tomorrow. The program appears to have been a success here, with a constantly growing stock market and inflation very much under control. Will Europe see the same result?

The recovery in Europe has remained sluggish, with the GDP for the Eurozone remaining lower than it was in 2008, before the recession, and unemployment is still in double digits in some areas. About a quarter of all government bonds issued in Europe are paying negative yields.

One problem is that our Federal Reserve was able to purchase U.S Treasury bills for our QE, while the ECB would have to buy 19 different countries' bonds. But with Europe at risk of deflation and interest rates still at zero, Europe's economic ministers may have no other choice.

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