Monday

25th Sep 2017

ECB considers printing more money

  • The ECB governing council comprises of the chiefs of central banks from the 18 eurozone member states (Photo: European Central Bank)

The European Central Bank over the next months will consider various options of 'quantitative easing' - also known as money printing - to counter a very low inflation rate, ECB chief Mario Draghi said Thursday (3 April) in a press conference.

"The ECB Governing Council is unanimous in its commitment to using all unconventional instruments within its mandate, in order to cope effectively with risks of a too prolonged period of low inflation," he said.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Draghi said quantitative easing was part of a "rich and ample discussion" on Thursday among the central bankers from all 18 eurozone countries on what to do to counter the lower-than-expected inflation.

Quantitative easing, popularly known as money printing, is the purchase of financial assets from banks to increase the amount of money in circulation when there is a risk of deflation.

At just 0.5 percent, eurozone inflation is well below the ECB target of two percent. A negative rate means deflation, when prices drop and consumers spend less in the hope that they will get a better deal the following days and weeks.

This in turn means fewer sales for companies and a drop in exports, as the euro becomes stronger.

Draghi said there is still no risk of deflation, but stressed that the ECB was willing to act to counter low inflation, too, not just deflation.

The ECB chief blamed the low inflation on a drop in international energy and food prices and "the exceptionally late Easter" which meant that demand for services in March was lower than last year.

For now, the ECB decided to keep the key interest rate at its record low of 0.25 percent, but Draghi signalled that it may be further lowered if inflation does not increase over the next months.

He also refused to give details of how the quantitative easing would work, saying just that "the ECB will work on different options, to see which would be the most efficient".

The ECB chief also said the governing council was "unanimous in its commitment to using also unconventional instruments".

This was a veiled reference to Germany's inflation-averse Bundesbank, which has consistently opposed any moves that would weaken the euro and increase inflation.

Asked what his biggest concern is for the eurozone, Draghi said: “My biggest fear is actually to some extent a reality and that is the protracted stagnation, longer than we have in our baseline scenario.”

The longer this stagnation persists, combined with high unemployment, the harder it will be to combat it with "conventional policy measures," he said, suggesting that money printing may be unavoidable.

Commenting on the ECB announcements, ING chief economist Carsten Brzeski said: "There are clearly two key take-aways from this sharpened language: the ECB is on even higher alert than before and unconventional measures, including the for markets so important QE, are backed by all ECB members."

But Brzeski doubts that quantitative easing will happen soon, especially if April data (with Easter increasing demand) shows slightly higher inflation.

German bank breaks anti-inflation taboo

In a marked shift from its age-old taboo of accepting higher inflation, the German Bundesbank has said it may tolerate a devaluation of the common currency to help out crisis-hit countries.

EU takes time to ponder tech giant tax

The EU commission published a paper that outlined several options on how to increase tax income from internet companies' activities, but fell short of proposing legislation.

EU commission changes gear on trade

The EU executive seeks new deals with Australia and New Zealand, while aiming to overhaul the global investment protection system. It also wants to screen foreign investments.

EU preparing to screen Chinese investments

The EU is to screen foreign investments to avoid takeovers in sensitive sectors. But the plan, mainly aimed at China, will raise political and technical difficulties.

Investigation

EU bank accused of muzzling watchdog

An ongoing review of the the European Investment Bank's "complaints mechanism" could make the oversight branch less independent and less effective.

Stakeholders' Highlights

  1. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  2. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  3. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  4. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  5. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  6. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  7. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  8. Mission of China to the EUChina Leads the Global Clean Energy Transition
  9. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  10. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  11. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  12. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel