Europe’s shares have risen on Friday after European Central Bank’s Chief, Mario Draghi, has stated that its quantitative easing policy would continue as long as it is needed, as Germany’s Dax 30 index up by 0.6 percent and France’s CAC 40 index ahead of 0.4 percent.
To be able to buy bonds, the ECB prints new money, and this program is called QE or Quantitative Easing. The idea is that the program will inject more cash into the economy, lowering the cost of borrowing, which in return should encourage consumers and businesses in the eurozone to borrow more. When people and businesses have money on hand, they spend more and boost the economy as demand for goods and services will lead to high prices.
Draghi has stated at the International Monetary Fund in Washington, that the European Central Bank (ECB) would not stop in rolling out its printing scheme of approximately 1.1 trillion Euros, insisting that the bank’s actions will help household and businesses prepare for an interest rate hike in the future.
His statement shows that there is a chance, although little, of paring back the nestling programme, which was launched despite the reservations of the euro zone paymaster Germany.
Draghi has not given any statement on the debts of Greece and international creditors, and this remains a major threat to the euro zone economy. He also stated that although the ECB’s 60 billion Euros a month of purchases of government bonds were lifting asset prices and confidence; he also wanted them to increase investment and inflation in prices.
"To that effect, we will implement in full our purchase programme as announced and, in any case, until we see a sustained adjustment in the path of inflation," he stated.
Draghi has responded to critics whom argue that such money printing or quantitative easing (QE) could fuel price bubbles in property. He said that, "At the moment there is little indication that generalized financial imbalances are emerging."
Furthermore, the ECB chief has described speculations that the QE program due to last until September 2016, would be scaled back as surprising.
