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ECB Launches Fresh Stimulus! Grab 5 European Stocks Now
Tirthankar Chakraborty

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The European Central Bank (ECB) recently announced major stimulus packages, including an interest rate cut and a massive new bond purchasing program, aimed at shoring up the Eurozone economy. Global economic slowdown and the trade war have been weighing on the Eurozone economy for quite some time now.

Such an ultra-loose monetary policy helped the European stock market rise. Notably, it has been the ECB’s largest dose of monetary stimulus in almost three and a half years. Banking on such encouraging developments, investing in sound European stocks does not seem like a bad proposition.

ECB’s New Stimulus to Boost Eurozone Economy

The ECB has launched fresh stimulus packages in an attempt to prevent a dilapidated Eurozone economy from grinding to a halt. The ECB confirmed that it would trim its deposit rate (the interest paid to commercial banks when they place funds with the central bank) by 0.1 percentage points to an all-time low of -0.5%.

So now, banks will have to bear charges for balances kept in the central bank. Needless to say, such negative interest rates will eventually compel the banks to lend to consumers and business houses, instead of parking money with the ECB.

The ECB now expects its main deposit rate to remain at such low levels until and unless it has seen its inflation outlook “robustly converge to a level sufficiently close to but below 2% within its projection horizon, and such convergence has been persistent.”

At the same time, the ECB has announced a massive new-bond buying program. The central bank’s quantitative easing (QE) program will involve 20 billion euros ($21.9 billion) per month of net asset purchases for as long as required.

ECB President Mario Draghi urged governments to take fiscal measures to reinvigorate the Eurozone economy. He said that “in view of the weakening economic outlook and the continued prominence of downside risk, governments with fiscal space should act in an effective and timely manner.” The outgoing president of the ECB added that “in countries where public debt is high, governments need to pursue prudent policies that will create the conditions for automatic stabilizers to operate freely. All countries should reinforce their efforts to achieve a more growth-friendly composition of public finances.”

The stimulus package comes at a time when the Eurozone economy is failing to gain traction due to a broader global economic slowdown and the persistent U.S.-China trade tussle. A drop in international trade volumes has affected factory output, while overall Eurozone growth fell to 0.2% in the second quarter of this year from 0.4% in the first quarter.

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