ECB Finds Itself Stuck in Conscious ‘Active Inertia’
The central bank commits to a holding operation in the hope that vaccines and other policy makers will come to the rescue.
Looking for a way out.
Photographer: Daniel Roland/AFP/Getty Images
By expanding and extending its bond-buying program on Thursday, the European Central Bank made a policy decision that is understandable but unlikely to bolster the economy much or attain its inflation objective. In particular, it highlights the “active inertia” that the ECB finds itself in, one that has largely not been of its own making.
Given the economic and market circumstances facing the ECB, I suspect that the vast majority of its Governing Council felt that they had no choice but to do more of the same in terms of quantitative easing. That resulted in its decision to expand the Pandemic Emergency Purchase Program by 500 billion euros ($607 billion) and extend it by nine months while making its implementation somewhat more flexible, together with a 12-month extension of favorable funding for banks under the targeted longer-term refinancing operations. After all: