The European Central Bank is ready to start a new round of quantitative easing, in order to get the European economy back on its feet again.
The ECB president Mario Draghi made it crystal clear that, all measures available to the ECB will be taken to stop the European economic slowdown.
The export driven European economy is experiencing a deceleration, due to German economy-posting disappointing figures in the last months, the feud between European Commission and Italy over Italy’s budgetary policy and the effects of a “no deal” Brexit.
Draghi will go beyond the 2,6 trillion euro program which ended in 31/12/18. The ECB does not expect recession and does not expect deflation either for 2019. On top of that, according to Draghi interest rates in Europe are likely to be cut.
So far quantitative easing in Europe has failed to produce results. Inflation was expected at 2% in 2019, but in May inflation was only 1,2%. However, the Europeans expect inflation to reach 1,3% this year, 1,4% next year and 1,6% the year after.
Successive rounds of quantitative easing from central banks did little to stimulate global growth and the markets are not enthusiastic about further stimulus.
Quantitative failure will lead the markets to refocus on elevated depth levels and ill economic growth is likely to increase volatility.
The central banks are certain quantitative easing will work and that is the reason they insist with that policy
This is music to gold’s ears as central banks will continue to invest in gold as they want to diversify their investments. De-dollarization is also another incentive to invest in gold.