Reed Cavendish Wealth Management - End of ECB Bond Buying Looms

TAIPEI CITY, Taiwan, December 3, 2018 (Newswire.com) - With increasing risks to the euro zone, including slower growth in China, global trade tensions, Italy’s budget issues and Brexit uncertainty, Reed Cavendish Wealth Management analysts say the European Central Bank’s (ECB) decision to end net bond buying next month has been met with widespread concern.

In spite of a recent economic slowdown in the euro zone, ECB President Mario Draghi has said that the central bank will go ahead with plans to stop its €2.6tn stimulus program at the end of 2018, citing its belief that recent disappointing economic data is only temporary and that inflation will continue to pick up as demand and wages increase and push up prices.

However, while many believe the RCB is being too hasty in ending its institutional bond-buying policy, Peter Praet, the central bank’s chief economist, says this does not signal a withdrawal of accommodative monetary policy.

With economic risks rising for the euro zone as the outcome of Brexit remains uncertain and the rapidly escalating trade war threatens economic growth and recovery, Praet has stressed the need to reinvest maturing assets to ensure ongoing support for the economy while inflation gradually recovers.

Recent data showed that the euro zone’s purchasing managers’ index (PMI) has fallen to a four-year-low, causing a drop in business and investor confidence.

The ECB is due to meet early next month to make a final call on whether or not to end the bank’s net bond purchasing program and analysts at Reed Cavendish Wealth Management say this decision will be subject to data confirming the central bank’s predictions that inflation will continue to increase gradually in 2019.

Source: Reed Cavendish Wealth Management