ECB Ready to Start Printing Money Next Week

The European Central Bank said it will start printing money to buy bonds next Monday and delivered a robust economic outlook that will make it hard to extend the plan beyond its envisaged Sept. 2016 end-date.  The ECB is embarking on the programme of quantitative easing (QE) with a view to raising euro zone inflation from below zero back towards its goal of just under 2 percent, and to helping buoy economies across the 19-country bloc.

The ECB, which left interest rates on hold at record lows just above zero at its meeting off-base in Cyprus on Thursday, lifted its growth forecast to 1.5 percent for this year, from the 1.0 percent it predicted in December.  ECB staff foresaw euro zone inflation rising from 0 percent this year to 1.8 percent in 2017, which would put it in line with the bank’s target of close to but below 2 percent.

“If these very bullish forecasts are met, there certainly won’t be more QE after September 2016,” said Berenberg bank economist Christian Schulz. “In fact, they might then start discussing normalising policy rates at some point.”  But the bank still has a long way to go to convince markets its plans will be effective. Only half of the economists polled by Reuters think bond buying will help inflation rise towards the target and half think the purchases will be extended.


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