The move by the European Central Bank this week was not a major surprise. However, the magnitude of the new qualitative easing plan did come in above many experts’ predictions. The higher-than-expected amount (€60 billion) that the ECB will inject into the economy each month helped send stocks around the globe higher the euro to the lowest level in over a decade.
The thought process behind the ECB plan is that it will help stave off deflation, lower borrowing costs and weaken the euro so that exports can increase. The U.S. took the same path several years ago and it sent stocks to new all-time highs. The Japanese are in the midst of a similar program – with mixed results for equities – but has already greatly devalued their currency, the yen.
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