This Week's Forecasts & Trends E-Letter
European Central Bank Embraces QE, For Better Or Worse
January 27, 2015
Last Thursday, the European Central Bank (ECB) announced the much-anticipated launch of a sovereign bond buying program at the rate of €60 billion ($70 billion) per month known as “quantitative easing.” The ECB's QE program could be as much as one trillion euros over the next two years. The ECB said the purpose for the larger than expected QE effort is to head-off deflation and stimulate the struggling Eurozone economy.
It remains to be seen, however, whether the bond buying program will actually achieve its goals. It certainly hasn't worked as expected in the US, the UK or Japan. There are in fact some reasons to believe that QE will face even stronger headwinds in Europe, not to mention that the program is likely to devalue the Eurodollar which is already in freefall. We will look at all of these issues and more as we go along today.
Despite the benefits of sharply lower energy prices, two international organizations revised their global growth forecasts lower last week. The International Monetary Fund and the World Bank both reduced their growth forecasts for 2015 and 2016. While both organizations still expect global growth above 3% overall this year, they are becoming more concerned about recessions in Europe, South America and elsewhere. Details to follow.