Confronted with robust growth across Europe, HM Wilkins Imperial have reported that the European Central Bank has proposed an easing of stimulus and a deceleration of bond purchases despite a spike in Covid cases worldwide as well as signs of economic slowdown in the US and China.
HM Wilkins Imperial reported that European stocks closed mixed this Thursday, signaling investor caution over the economy and the anticipated direction of central banks accommodative measures. The ECB chose to maintain their existing monetary policy, but proposed an easing of net asset purchases that had been ramped up to support the pandemic’s emergency bond-buying program.
At the close of 2020, the ECB had propped up its stimulus program by over a third as well as offered a number of seriously inexpensive loans for banks, a bond stimulus package to support businesses confronted with Covid-19 stressors. This support catapulted the ECB’s monetary stimulus to over 3 trillion euros, providing the necessary support to the eurozone economy.
The decision to scale back on bond-buying comes as no surprise amidst rising inflation and stellar economic growth says an analyst at HM Wilkins Imperial. However, this is in contrast to the US Federal Reserve which has opted to begin phasing out stimulus altogether this year.
Economists at HM Wilkins Imperial have suggested that the discrepancy in approach lies in diverging inflationary trends which imply that these two superpowers are in completely different positions in terms of easing monetary support. In Europe, there seems to be far more flexibility than in the States where the Fed made a commitment to fixed purchases each month. Inflationary pressures cannot be compared like for like, and analysts at HM Wilkins Imperial argue that the eurozone has not yet reached an alarming level that would warrant concluding crisis support.