The Federal Reserve just closed the book on its government-bond purchases. The Bank of Japan on Friday vastly expanded its program. Now attention turns to the question of whether the European Central Bank will speed up its printing presses and start buying sovereign debt.
It would be a much tougher road for the ECB. The eurozone’s central bank faces political and practical hurdles that would complicate any attempts to replicate the U.S. and Japanese programs, known as quantitative easing or QE.
The ECB meets Thursday, but it isn’t expected to unveil new measures. At issue is whether any ECB purchases of government debt would lift inflation toward the bank’s target of near 2%. Annual eurozone inflation was just 0.4% last month.
ECB interest rates can’t go lower. That leaves purchases of public and private debt as the main lever to keep borrowing costs down, boost asset prices, weaken the euro and goose inflation.
The ECB is buying some private securities and is open to adding corporate bonds. Officials have flagged government-bond buying as possible, but reached no decision amid doubts such purchases would help the economy without supportive government measures.