ECB Needs To Spend $1.4 Trillion To Lift Inflation Study Says

The European Central Bank would need to buy assets worth €1 trillion ($1.4 trillion) to lift inflation by as little as a fifth of a percentage point, according to an internal assessment of quantitative easing.

The estimate, first reported by Frankfurter Allgemeine Zeitung newspaper but confirmed by a person familiar with its contents, comes a day after the ECB gave its strongest hint yet that it is prepared to embrace bond-buying to prevent the euro zone from sliding into deflation, or even a long period of low inflation.

The estimate, which is based on just one of a number of options for QE that policy makers are considering, shows that €1tn of purchases of euro-denominated securities over the course of a year, or €80 billion a month, could add between 0.2 and 0.8 percentage points to inflation in 2016.

The ECB is expecting a figure of 1.5 per cent in two years meaning QE could also potentially take inflation above the central bank’s target rate of just below 2 per cent.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza