A big band-aid, but no cure for Europe

The ECB did what it had to do this week, but quantitative easing won't solve Europe's fundamental problems.

Robert Johnson, CFA 26 January, 2015 | 8:00PM
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The biggest news this week was the European Central Bank's announcement of a very large and very long program of quantitative easing. After tiptoeing around the issue for more than a year, the ECB decided to implement a massive bond-buying program that matches the scope of the United States' QE3 program.

With much of the action widely anticipated, the reaction this week was relatively muted. Still, the euro and worldwide interest rates had already been falling for months in anticipation of this well-telegraphed program. Remember, even in the United States interest rates fell dramatically while QE was in the rumour stages, and remember that rates began to move up shortly after the formal bond buying was started.

The economic news this week ultimately wasn’t momentous in either direction. Housing data remained stuck in neutral, but that is often the case during the holidays and bouts of cold weather. It will probably be at least springtime before we can tell if lower rates and better employment data will help this industry regain its mojo.

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Robert Johnson, CFA

Robert Johnson, CFA  Robert Johnson, CFA, is director of economic analysis for Morningstar.

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