EU Outlook Increasingly Resembles US a Few Years Ago

December 3rd, 2014

The European Union (EU) economy has endured a challenging year with stock market and currency volatility and a sluggish labor market.  New market numbers show that the private-sector has continued to slow throughout the year.  This week, Markit’s measure of the manufacturing and services sectors, found that the EU reached a 16-month low in November, putting the EU in line for one of the weakest quarters in recent years.

In response to its anemic economy, the EU appears poised to follow in the footsteps of the United States (US). Just a few months after the US Federal Reserve finished its quantitative easing (QE) bond-buying program, the European Central Bank (ECB) appears to be seriously considering a more aggressive monetary policy program of its own.  The ECB began buying covered bonds and asset-backed securities in September, but Mario Draghi, ECB President, has recently discussed a bigger program to boost inflation.

The ECB is scheduled to hold a meeting this Thursday, but is unlikely to roll out the program right away according to political rhetoric. Instead, it appears that the ECB will wait to see how the year finishes up before making any major decisions.  Judging by the recent numbers, however, the ECB does appear to be on a fixed course towards increased stimulus.

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