Impact of ECB stimulus on markets
John Ainger, Justina Lee & Tasos Vossos | 01 Feb 2019 00:30
Despite the best efforts of central bankers, investors are betting the next phase of European Central Bank’s (ECB) monetary policy will look a lot like the last one.
They’re sending yields lower across the region, letting bank stocks languish and spurring a rally in corporate debt - all signs that investors are positioning not for normalisation but for another long run of easy money.
Market expectations for the peak rate in this cycle are being slashed, and the implied timing for a first hike since 2011 is being pushed out further by the day.
The verdict may be harsh, but markets reckon the ECB has no choice but to double down on dovishness after economic data broke bad.
For starters, it looks likely it’ll have to refresh one of its lesser known stimulus tools by replacing long-term loans pro- vided to European banks in a bid to spur real-world lending.
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