QE could be stepped up in the eurozone

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Eurozone economic growth was slower than expected in the third quarter, preliminary data showed yesterday, increasing market expectations that the European Central Bank will step up its monetary stimulus to the economy next month.

The European Union’s statistics office Eurostat said the gross domestic product of the 19 countries sharing the euro expanded 0.3 per cent quarter-on-quarter for a 1.6 per cent year-on-year increase in the July-September period.

Economists polled by Reuters had expected a 0.4 per cent quarterly rise and a 1.7 per cent annual increase.

“This outcome is also lower than the ECB’s staff projections, which would add to the already strong case for the ECB to step up monetary stimulus in December,” said Nick Kounis, head of macro and financial markets research at ABN AMRO bank.

“If the ECB needed a final push to be decisive, this is it,” he said.

He expected the ECB to step up the pace of its government bond-buying programme by 20 billion euros per month to 80 billion, a signal that such purchases would go on beyond September 2016, and expand the eligible universe of assets.

It was reported this week that the ECB was considering regional and municipal bonds as an option.