More of the bond buying ‘good money after bad’ that hasn’t worked in Japan and the US?
Lowering interest rates to virtually nothing and super cheap loans for banks didn’t work, so ECB chief Mario Draghi has to do what central banks in the US, Britain and Japan did, that is buy up government debt to pump money into the economy.
But many economists are not convinced if will be effective. Jane Foley, Head of Forex Strategy at Rabobank said: “Bond yields across the board are now extremely low, and growth is also extremely low. So you’ve got to argue that a marginal decrease in interest rates from their already low levels is unlikely to bring a boom to either growth or inflation.”
Even with ECB action, the feeling among economists is that inflation and growth are likely to remain painfully low, sparking concerns of another financial crisis, not helped by the renewed fears that Greece might be forced to leave the eurozone.
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