The headquarters of the European Central Bank in Frankfurt. Photograph: Daniel Roland/AFP via Getty ImagesThe European Central Bank is using its pandemic-era bond-buying programme to shield highly indebted euro zone countries from the effects of its decision to unwind stimulus programmes in its bid to fight inflation.
“The deviation now is very large,” said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, about the ECB’s reinvestments. “It looks like the ECB has been very active by reinvesting almost all the proceeds from core countries into peripheral countries.” Sven Jari Stehn, chief European economist at Goldman Sachs, said the “extent of the flexibility that has been utilised” in reinvesting proceeds of bonds that were part of the PEPP programme was “somewhat more than people had expected”.
“I think it’s a good thing for them to be bold . . . it’s good for markets to see they’re putting their money where their mouth is,” said Mr Ducrozet, adding that “the clear message is that they’re using this flexibility almost to the max that they could”.
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