U.S. markets open in 3 hours 19 minutes
  • S&P Futures

    3,819.50
    -26.50 (-0.69%)
     
  • Dow Futures

    30,833.00
    -249.00 (-0.80%)
     
  • Nasdaq Futures

    13,324.00
    -71.50 (-0.53%)
     
  • Russell 2000 Futures

    2,118.20
    -20.30 (-0.95%)
     
  • Crude Oil

    51.79
    -1.34 (-2.52%)
     
  • Gold

    1,851.40
    -14.50 (-0.78%)
     
  • Silver

    25.33
    -0.52 (-2.03%)
     
  • EUR/USD

    1.2182
    +0.0009 (+0.07%)
     
  • 10-Yr Bond

    1.1090
    0.0000 (0.00%)
     
  • Vix

    23.18
    +1.60 (+7.41%)
     
  • GBP/USD

    1.3666
    -0.0064 (-0.47%)
     
  • USD/JPY

    103.6800
    +0.1750 (+0.17%)
     
  • BTC-USD

    31,793.66
    +1,309.91 (+4.30%)
     
  • CMC Crypto 200

    629.94
    +19.95 (+3.27%)
     
  • FTSE 100

    6,667.59
    -47.83 (-0.71%)
     
  • Nikkei 225

    28,631.45
    -125.41 (-0.44%)
     

Deflation raises chance of half-trillion stimulus from the ECB

Tim Wallace
·1 min read
Lagarde - Francois Lenoir/REUTERS
Lagarde - Francois Lenoir/REUTERS

Christine Lagarde is expected to ramp up bond purchases in the eurozone next week to battle falling prices, as the European Central Bank struggles to get close to its inflation target.

Prices last month were down 0.3pc compared to November 2019, marking the fourth consecutive month of annual deflation.

The ECB’s target is to keep inflation below, but close to, 2pc.

As a result economists expect the central bank to take action to stimulate the economy through the pandemic emergency purchase programme (PEPP) under which it buys government and corporate assets, as well as the targetted longer-term refinancing operations (TLTRO), which inject funds into banks.

“With inflation persistently weak, we expect the central bank to provide further stimulus, extending PEPP to the end of 2021 and topping it up by €500bn (£442bn), and extending TLTRO to mid-2022, until shortly before when the ECB expects eurozone GDP to reach pre-crisis levels,” said Jacob Nell at Morgan Stanley.

It may be difficult for the ECB alone to boost inflation, said Fabio Balboni at HSBC, requiring more Government spending too.

“Stubbornly low inflation adds more pressure to the ECB to act in December, even if the central bank has started cautioning markets about the limits to the effectiveness of monetary policy to lift inflation, at least in the near term,” he said.

“We expect more easing and support of looser fiscal policy to sail through the Governing Council in December. But the ECB's challenges will only grow, to prevent a possible de-anchoring of inflation expectations ahead of important wage settlements early next year and also if (or when) it needs to think about an 'exit strategy' from the current ultra-accommodative monetary policy stance.”