The ECB (European Central Bank) would struggle to fight the coming recession on its own, Olivier Blanchard—Former IMF Chief Economist—said to CNBC. In the middle of the gigantic stimulus that the ECB puts ahead in the stir of the monarch debt crisis, there are increasing doubts whether the central bank would be capable of deploying the same level of interference whenever the next crisis hits. Blanchard said, “I am sure that the ECB cannot on its own at this point deal with a recession and that it would need help, which is fairly obvious.” He stated that the question is not about the lack of available tools, but it is of their actual consequences on the market.
Blanchard added, “They have a lot a lot of ammunition, the question is how much it destroys, as they can really purchase assets in huge quantities, but it might at this stage have a little outcome on the rates, which is what matters the most in the end.” The ECB completed its 3-Year long bond-purchasing program in December of the last year, called quantitative easing. The purchase of administration bonds in the eurozone attained around $3 Trillion, but the central bank also purchased corporate debt and has put interest rates at low levels. The bank’s rates on its deposit facility and marginal lending facility are at 0.40% and 0.25%, respectively.
Recently, ECB was in news as its officials stated that bank is ready to act in the middle of “alarming” market indications. ECB lawmakers stated the institution would act if required to support the financial system, keeping animate the prospect of interest-rate curbs or quantitative reduction returning to the euro area. Benoit Coeure (Executive Board Member) and Pablo Hernandez de Cos (Governing Council Member) said executives are monitoring indications from markets, though added they would make their own evaluation of the situation prior to any monetary policy action.
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