The European Central Bank is to grow the scale of its quantitative easing programme by €20bn a month, expanding it to include a wider range of corporate bonds.
All rate changes will take effect from 16 March.
ECB’s six new or amended policy measures – including lowering the base interest rate to zero and the bank deposit rate by 10 basis points to -0.4% – were likened by Patrick O’Donnell, investment manager at Aberdeen Asset Management, to the central bank’s “having thrown the kitchen sink” at the problem. He said it was a “big surprise” that non-financial corporate bonds had been included within the remit of the expanded asset-purchasing facility but was uncertain how long the rally the announcement triggered would last.
Ian Tabberer, global equity investment manager at Henderson Global Investors, argued that the ECB’s approach risked tackling the wrong areas. “At the margin, this will help financial assets, [but] it is anaemic demand for credit rather than the cost of supply that appears to be the fundamental issue, and this is creating the low-inflation environment in Europe,” he said. “We hope these measures can boost confidence but doubt whether monetary policy alone can kick-start the broader European economy.” He said questions remained whether the impact on the euro, down following the ECB’s decision, would in fact have a positive impact overall. “If these measures do lead to a weaker euro relative to other global currencies, it must be remembered that, in a global context, this is a zero-sum game,” he said.
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