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Massive Stimulus Package Likely Next Month, But ECB Downplay It

During the summer, president of ECB Mr. Mario Draghi said that they are considering options in order to prop-up the currently 19 member euro zone economy. He outlined that the policy may include buying new assets that will boost inflation and stimulate lending.

As investors were getting ready for the next ECB meet, 2 of the top executives from central bank of euro zone have come at front and tried to inject in some real facts and figures. Sabine Lautenschlaegar, who is an executive member, said in an interview that based on his own opinion and the current set of data, it is very early for such a large package. He added that he is completely convinced that the APP is the ultimate ratio, and is only meant to be used in case there is a risk of deflation.

His fellow ECB member and chief of the Dutch central bank, Klaas Knot also spoke some words of caution, he said that if the risk of deflation is over Europe then Asset Purchase Program is the right program to avoid it, but as of now there is no need for it according to his reading of the situations.

The market has shown mute response to these statements and the European stocks have recorded growth in the past 2 days. If it gets implemented then it will be the second time in the history of Europe that central bank will be directly pumping money into the Euro zone’s economy.

Silvia Dall’Angello who is a senior economist in Hermes Investment Management said via mail that he isn’t going to rule out such an open ended approach of ECB. He further added that an ECB executive has recently made to implement a more forceful approach. He said that a bigger program will most likely happen that may reach up to 45 billion euros per month for a year.

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