QE on the horizon in struggling eurozone

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European Central Bank President Mario Draghi threw the door wide open yesterday for more dramatic action to rescue the eurozone economy, saying “excessively low” inflation had to be raised quickly by whatever means necessary.

Draghi said there was now no sign of economic improvement in the months ahead and that the ECB would expand and step up its programme to pump more money into the currency bloc if its current measures fell short of lifting inflation.

“We will continue to meet our responsibility – we will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us,” Draghi said.

“If on its current trajectory our policy is not effective enough to achieve this, or further risks to inflation outlook materialise, we would step up the pressure and broaden the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases.”

“Draghi all but announced that the central bank will step up monetary easing soon. Mr Maybe has become Mr Definitely,” said Nick Kounis, an economist with ABN Amro. “We think the ECB would exhaust other alternatives before moving to sovereign QE.”

Draghi had earlier said further measures could involve large-scale purchases of government bonds, also known as quantitative easing.

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