Filed Under:  U.S. & World

European Indices Rise Due to ECB Move

Contributed by on January 24, 2015 at 12:23 pm

fifty euro bank notesOn Thursday, the ECB, or European Central Bank, announced that it would be embarking on a program of quantitative easing, the same monetary policy employed until very recently to combat the U.S financial crisis, in Europe. In reaction to this move, several European indices, including the CAC, DAX, IBEX, and EURO STOXX 50 rose sharply during the day. In many instances, these indices rose in excess of 1%, showing strong enthusiasm from the investing world for this shift in monetary policy.

The ECB’s planned deployment of quantitative easing will take place over 19 months and is budgeted for 60 billion euros per month. This money will be used to purchase national bonds in hopes of stimulating the economies of stagnating countries within the Euro Zone such as Greece and Portugal. In the long term, the move is also meant to create a greater degree of inflation than what has been seen in the current European economic climate. Inflation is currently at 0.7%, with a targeted goal of 2% annually.

It is very likely that the introduction of quantitative easing on such a large scale will help to jump start the European economy. Speculation over such increased growth is what drove the sudden rise of European indices following the announcement. However, it may be some time before the effects of the measure are actually felt beyond the indices. For the moment though, investor confidence in European markets has certainly risen, and the indices are expected to hold their new positions.

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