The International Monetary Fund (IMF) advised the Eurozone policymakers to start a quantitative easing late last week which painted a unwelcoming picture of the bloc should the current trends persist to continue.
If inflation still continue to remain low, the European Central Bank (ECB) is deeply taking into account a significant balance sheet expansion which will include asset purchases and similar acquisition as it is predicted to give annual report on the region’s existing economic policies.
The European Central Bank (ECB) is considered as the only central bank which did not opt to follow the quantitative easing following the financial crisis. Inflation in the affected region still sits at around 0.5 %, the lowest level in more than five years and far below the ECB projected target of 2 % respectively.
Even the central bank’s own forecasters with their expert predictions are not totally sold out that the price growth will return to its average target level in the next two and a half years. The report indicated that there is a high risk that the lower growth and additional inflation would make it progressively more difficult for national governments to service current existing and outstanding debts.
The IMF’s review was likewise depressing especially that the euro area’s ability to taper unemployment. In some states, the report revealed that the growth and expansion would have to be three or four times as increasingly strong in order to cut back the unemployment according to their historical records.
Quantitative easing falls squarely in the present directive which is collectively using alternative and non-conventional approaches in addressing the risk of a prolonged period of low inflation. The incumbent ECB chairman gave a strong impact that the same could end up following the IMF’s prompt.
Moreover, the ECB chairman made his opposing comments regarding the recent calls in order to make Eurozone’s deficit reduction policies less strict in exchange for better accepted structural reform programmes . Furthermore, flexibility within the given set of new rules using structural reforms on a purview of a growth-friendly fiscal consolidation will mean subsequent lesser government expenditures.