If the law was the ultimate arbiter, the European Central Bank would have the most verdant of green lights for an unlimited bond-buying programme with new money. In reality, politics and German concerns will dictate.
Markets are beginning to ponder just how definitive the European Central Bank may be next week in launching quantitative easing. One reason is today’s ruling at the European Court of Justice.
The European Commission will unveil legislative proposals for its 315 billion euro investment plan and the findings of a public consultation on the investment elements of a planned EU-U.S. free trade deal which could significantly boost growth.
The world’s major central banks have long followed the same general flight path, guided by the economic winds of growth, inflation and financial markets. It has worked pretty well for policymakers in the United States, Europe, Japan, and the United Kingdom: moving together to tighten or loosen monetary policy makes things more predictable for citizens, businesses and investors. It also serves as buffer to any volatile currency movements, at least among developed economies. But six years after the worst recession in decades, this could be the year central bankers split off and – with some risk – go their own way.
German inflation figures for December will presage the euro zone number on Wednesday, together offering one of the final pieces of the jigsaw for the European Central Bank before its late January policy meeting at which it could commence a quantitative easing government bond-buying programme.