Easing does it: the ECB takes the plunge

Easing does it: the ECB takes the plunge. Today the European Central Bank is expected to announce a programme of quantitative easing-the creation of money to buy financial assets. This will entail purchasing sovereign bonds, the only asset class big enough for large-scale QE. The programme, which may amount to €600 billion ($700 billion) over the next year, is needed to revive the euro zone's feeble economy and to ward off persistent deflation: prices fell by 0.2% in the year to December. The ECB has in the past been reluctant to follow other big central banks in adopting this policy, because of the difficulty of buying bonds in a monetary union of 19 states whose creditworthiness varies from triple-A (Germany) to junk (Greece). It is expected to overcome German opposition by making each national central bank largely responsible for buying its own country's bonds-and for bearing any losses.

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