Draghi’s Final Stimulus Push Keeps Bond Investors in Suspense
While the ECB is widely expected to cut interest rates next month, the prospect of a renewed round of asset purchases is shrouded in uncertainty. Investors must judge how much quantitative easing the euro-zone economy needs, how much buying space the central bank has before it hits self-imposed limits — and whether policy makers will dare test Draghi’s claim that he can bust through those restrictions if needed.
What Bloomberg’s Economists Say
“We expect the ECB to cut the deposit rate by 10 basis points and relaunch its asset purchase program in September.
“They’ll change the rules if they need to,” said Oliver Rakau, an economist at Oxford Economics, who predicts monthly purchases of 20 billion euros to be announced in September. “The question is how big of a package do you even need, and do you really need to have 60 billion that we had at times when we were still worrying about deflation? From that perspective, I think QE will be smaller, and that should also give the ECB more time to reach the boundaries.”
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