Quantitative easing (QE) by the European Central Bank (ECB) appears increasingly ineffective. The ECB has expanded its balance sheet by more than €1 trillion since November 2014 to over €3 trillion in mid-May. But inflation has been trending lower.
Nonetheless, we expect the ECB will continue its heavy lifting and eventually even pursue an extension of the QE program that will approach de facto if not de jure monetization of fiscal deficits. We see eurozone inflation remaining somewhat below 2% over the secular horizon of five years.
For further details, please read, “The Global Outlook: Stable But Not Secure.”