The announcement of a new stimulus package is a remarkable turn of events, just nine months after the ECB
signaled it was done with ever-looser policy. Now inflation is running at barely half the goal of just under 2%, and the manufacturing sector is in a contraction that risks spreading to the rest of the economy.
Hours before the decision, industrial-production figures showed the third quarter off to a weak start with euro-zone output dropping 0.4% in July, more than expected. The decline was led by Germany, which is on the verge of a recession as a global slowdown in trade caused by the U.S.-China standoff and the uncertainties surrounding Brexit hurts its exporters.
The approval of such broad measures is a win for Draghi in his penultimate meeting before he steps down next month. Governors from core economies including Germany and the Netherlands pushed back against the resumption of quantitative easing, saying it should be a last resort in case the outlook worsens.
around the world are easing to combat the spreading weakness, with the U.S. Federal Reserve likely to lower rates next week for the second time this year. The International Monetary Fund reduced its global growth outlook in July.
Still, there are doubts the ECB’s latest measures will prove as effective as hoped. Longer-term bond yields have already fallen sharply because of the economic slowdown, and another round of debt purchases might not exert much more downward pressure.
--With assistance from Jeannette Neumann, Piotr Skolimowski, Zoe Schneeweiss, Jana Randow, Lukas Strobl, Craig Stirling, Fergal O'Brien, Brian Swint, Aaron Eglitis, Alexander Kell, Raymond Colitt, Iain Rogers and Nicholas Comfort.
european central bank, quantative easing, QE, fiscal stimulus, fiscal stimulus package,