Eijffinger, Sylvester, (2016), “The ECB Goes Rogue”, Project Syndicate, 18 March
The European Central Bank has done it again. At its recent meeting in Frankfurt, the ECB Governing Council decided to increase bond purchases further, from €60 billion ($67 billion) to €80 billion per month, with corporate bonds now also eligible for purchase. The deposit rate, too, was reduced once again, and now stands at -0.4%. This is far from a neutral policy – and it takes the ECB far beyond its mandate of preserving monetary stability. The motivation behind the recent policy moves is clear: ECB President Mario Draghi is committed to curbing deflation, a serious threat to economic growth. After all, in a deflationary environment, it is more difficult to repay debt, so companies will tend to postpone investment. Recent Eurostat figures, which show that the annual consumer-price index fell by 0.2% last month, heighten concerns.
Relevant Posts
- Merler, Silvia, (2016), “ECB TLTRO 2.0 – Lending at negative rates”, Bruegel Blog, 11 March
- Gerba, Eddie, Macchiarelli, Corrado, (2016), “Policy options and risks of an extension of the ECB’s quantitative easing programme: An analysis”, European Parliament, February