European Central Bank Could Recourse to Extreme Measures

Economy Jamie Simon
http://stocknewsusa.com/wp-content/uploads/2016/09/^C223E0A76A9E7C972C29BEBBDCF0F5E80514E16DE8EC0062CB^pimgpsh_fullsize_distr.jpg

The European Central Bank (ECB) could be forced to venture into the market shares issued by companies, land that came out of desperation, just like the Bank of Japan. These, together with the government pension fund, have reached the major shareholders in more than 400 Japanese companies. The US Federal Reserve gives the impression that something unseen will happen in America – negative interests.

As they are approaching the limits of their ability to stimulate economies, the major central banks push their limits when it comes to monetary policies.

The central banks are “quite close” to their capacity limits of boosting savings, Angel Gurria warned, the Secretary General of the Organization for Economic Cooperation and Development.

In the absence of “innovative, collective” policies the global growth will likely remain weak, Gurria said in an interview with Reuters before the meeting of leaders of the 20 largest economies in the world (G20) in Hangzhou city in China.

“I have allowed central banks to do all the hard work. Now is the time for structural changes, “said Gurria.

Until these changes occur, central banks conduct their policies to the extreme. ECB could be forced to buy shares, just like the Bank of Japan, as part of any extension of the program to stimulate the economy and inflation in the euro area, writes Reuters.

But it will be difficult to do so without distorting an important market for investors. ECB bonds can remain eligible for the scheme with its bond purchases worth 1.700 billion euros, which means that it could resort to alternative measures if it decides to further relax the monetary policy.