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It is remarkable to think we are nearing the original end date for the European Central Bank’s QE programme, and yet there has been very little improvement in the eurozone’s overall economic position. Indeed, with the German economy looking peaky we might even have gone backwards in economic growth terms.
The ECB has seen its stock of eurozone assets pass the €1 trillion mark, a remarkable milestone (couldn’t it have just bought Greece?), although the real total probably nears €1.4 trillion once Greek bonds are thrown into the mix. Now the programme is set to continue to the end of next March, with the €60 billion monthly purchases now increased to €80 billion. The most recent growth figure was 0.3%, actually below the 0.4% of the last quarter of 2014, and with growth forecasts set to be revised down yet again the scale of the problem becomes painfully clear.
Recently Mario Draghi noted the economic weakness, and also warned the strong period (if you can call it strong) of job creation could be coming to an end, adding that it looks like the economy is losing rather than gaining momentum.
Inflation is also seemingly absent for the eurozone, with the official rate at 0.2% versus a 2% target, and with oil weaker again this might fall yet further. QE was supposed to be inflationary, and while examples of rising prices can be found the overall picture points to a firm failure for this part of the policy.
It seems likely we will get an extension to the QE programme beyond March 2017, perhaps on the quaint basis that doing more of a failed policy will eventually lead to success. Hints of more easing, perhaps even of outright equity purchases, could come through too. However, with the euro on the verge of turning higher versus both USD and GBP after weeks of declines Mr Draghi will need to pull something big out of his hat.