The European Central Bank will be gathering soon to discuss a new possible stimulus package. This was announced today by Peter Praet, the leading economist in the ECB, in an interview with Reuters.
Previously the ECB instituted a large-scale bond-buying stimulus program after the 2008 financial crisis in order to support the European economy and help guide it back to growth. This method was effective and the economy did grow stronger over the past 8 years. However, in 2016-2018 there were far too many shocks on the global financial markets, including unfavorable election results, Brexit, and Trump’s trade war. These hindered growth beyond the ECB’s original plans. With the previous quantitative easing plan ending in December 2018, investors were speculating what the central bank might do next to protect the economy from more damage.
QE packages like what the ECB has done in the past tend to be good for promoting spending and inflation. However, this also devalues the currency somewhat, so if it comes to be, even more weakness for the euro will be in store. Still, Praet’s statement refers to just a conversation about it, not an actual plan or implementation, so analysts will have plenty of chances to prepare for any such changes on the market.
