ECB steps are not a “silver bullet” – Wells Fargo

By FXStreet Analysts from Wells Fargo welcomed the steps that the European Central Bank announced on Thursday. They think they will support growth in bank lending and ultimately economic growth at the margin; but they do not expect these policy steps to lead to a resurgence in real GDP growth in the Eurozone.

Key Quotes:

“While we certainly welcome the steps that the ECB announced today (Thursday, March 10), we would caution that they are not a “silver bullet.” That is, these policy changes may help to stimulate economic growth on the margin, but they are not likely, by themselves, to lead to a sharp strengthening in the rate of economic growth in the Eurozone. The ECB started to use the Long-term Refinancing Operations (LTRO) program aggressively in the dark days of the sovereign debt crisis in 2011 and 2012, and it rolled out its TLTRO program in September 2014. QE started about a year ago.”

“What has the ECB accomplished with these measures? Bank lending, which contracted from 2011 to 2014, is growing again. At its current year-over-year growth rate, however, bank lending is hardly robust. The euro area economy is expanding, but at a sluggish rate, and the core rate of inflation …read more

Source:: FX Street