The European Central Bank is actively looking at what more it can do to get the eurozone economy growing robustly again, but for the moment it is waiting to see the effect of stimulus measures rolled out in recent months.
After the bank’s November policy meeting, ECB President Mario Draghi said things look gloomy for the region’s recovery, but there was no cut in the cost of borrowing which remains at a record low 0.5 percent. However they are on standby for pumping more money into the economy.
Draghi told a news conference:“The Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate.”
He added: “The governing Council has tasked ECB staff and relevant Eurosystem (central bank) committees with ensuring the timely preparation of further measures to be implemented if needed.”
That would duplicate what the US central bank has already done, quantitative easing (QE), that is printing money to buy government and other bonds, which also theoretically pushes up inflation.
The aim is to keep the eurozone from slipping into deflation, where prices fall and people delay buying, thereby slowing economic growth.
So far the ECB has not gone down the expensive QE path. It has been hoping it would be able to get away with pushing cash into the banking system by buying private debt and offering long-term loans to banks at low interest rates to encourage them to lend it on to businesses and individuals.
The next move would be to buy corporate debt; the outright purchase of sovereign, or government bonds, would however face steep political hurdles, especially from Germany.