Serious deflation risks in the euro zone mean it is no longer a question of if, but when the ECB will purchase sovereign bonds — at least among many of those who are paid to forecast policy.
More cheap loans to banks was the European Central Bank’s answer to boost bank lending to private businesses in the euro zone. But the latest data show credit growth is still contracting and the best some economists came up with is that at least it’s not as bad as it was a year ago when it was shrinking faster.
It’s been more than two years since euro zone banks increased net lending to private businesses. And it’s been nearly half a year since the European Central Bank launched a new plan to turn that situation around.
After a stunning fall in German industrial orders for August – the 5.7 percent monthly drop was the largest since the global financial crisis raged in 2009 – industrial output for the same month has just plunged by 4.0 percent, also the biggest fall in five years.
from Global Markets Forum Dashboard:
A healthy dose of fear has re-entered financial markets in the final three months of the year. The Chicago Board Options Exchange VIX, a widely tracked measure of market volatility, rose to a two-month high on Wednesday.
For the European Central Bank, a lot is riding on euro zone banks ramping up lending to the private sector. Unfortunately, after a very long time, lending still is not growing. It fell 1.6 percent on a year ago in July.