Stock markets have fallen today after the European Central Bank decided against extending quantitative easing beyond the next six months.
The ECB was largely expected to provide fresh stimulus to the economy through the printing of more money. Its ongoing bond-buying programme has gone a long way in propping up the stock markets in recent months, with central banks printing money to purchase assets. However Draghi’s refusal to commit to extending the programme has knocked confidence, seeing major European exchanges dip, with the DAX Index falling by more than 1.16% while the CAC 40 fell 0.86%.
The ECB finds itself in an extremely difficult situation in which its only weapon against stock market collapse is no longer working and this is a clear indication that the ECB know that QE is not the long term answer. While it has held markets up in the short term, it is not a sustainable measure and has so far been unable to stimulate the necessary level of growth.
Draghi was also hawkish on ECB plans for interest rates, refusing to give a committal response when asked if rates would remain positive, only stressing the necessity that they stay low.