Thursday, January 22, 2015

ECB unveils massive QE boost for eurozone

The European Central Bank (ECB) will inject at least €1.1 trillion (£834bn) into the ailing eurozone economy.
The ECB will buy €60bn bonds each month from banks until the end of September 2016, or even longer, in what is called quantitative easing (QE).
QE in theory increases the supply of money, something that keeps interest rates low and encourages borrowing and therefore spending.
The news sent the euro to an 11-year low against the against the US dollar.
Record low eurozone rates have failed to boost the 19-country euro area. The ECB also said it would keep eurozone interest rates at 0.05%, a record low. Rates have been at that level since September 2014.  ECB president Mario Draghi said the programme would begin in March.
Earlier this month, figures showed the eurozone was suffering deflation, creating the danger that growth would stall as businesses and consumers shut their wallets, as they waited for prices to fall.
Mr Draghi said the programme would be conducted "until we see a sustained adjustment in the path of inflation", which the ECB has pledged to maintain at close to 2%.
Shares rose in response to the news and bond yields, which are linked to the amount governments pay to borrow, fell, particularly those of the weakest countries including Italy, Spain and Portugal.
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Link to BBC

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