ISM Associates: ECB Expected To Extend QE Beyond March 2017

ISM Associates: Failure to boost inflation to 2% target means ECB could extend term of QE another 6 months.
ISM Associates: Failure on the part of the European Central Bank (ECB) to kickstart the European economy and push inflation towards its "sweet spot" 2% target could see the central bank extend its trillion-euro asset purchase program until September 2017, a 6-month extension to the current program's March 2017 expiry date.
Furthermore, it could also expand the scope of bonds it can purchase to include those with negative yields and those with less than 2 years until they mature because, using the current criteria, it would be unable to meet its target for purchases.
The ECB is among a number of central banks in developed economies trying to boost inflation and stimulate growth using quantitative easing including the Bank of Japan and the Bank of England. Results thus far have been decidedly mixed against a backdrop of anemic consumer spending and slowing growth in the wider global economy.
"They're going to have to ramp up the amount of stimulus they provide," said James Preston, Chief Economist at ISM Associates. "There is a feeling, certainly among investors, that the ECB arrived late to the QE party and just as the policy started to be regarded as far less effective a stimulus tool than it was in the aftermath of the financial crisis."
"Of course, we don't think that will get in the way of at least being seen to be doing something to combat woeful economic performance across the 18 countries that use the single currency," said Kamuri Soka, head of fixed income research at ISM Associates.