Why The ECB Probably Won't Utilize Quantitative Easing

Alpari Market analyst Craig Erlam says that even though it seems like most people want to see quantitative easing from the European Central Bank, it probably won’t happen.

He was recently a guest on Benzinga’s #PreMarket Prep to explain the problem with the ECB trying quantitative easing that no other central bank has.

Unique Problems

“This is not just buying one common debt security … They’ve got to come up with a format that enables them to buy a whole host of different bonds from the euros,” Erlam explained. “And this is bonds that are rated at different classifications that carry different amounts of risks.”

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The other aspect that the ECB has to consider is whether this will equate to funding the eurozone governments and helping them out, he said, because the central bank wants to encourage them to sort out their own economies and look at more fiscal discipline.

“So, I think they’ve got a much tougher job when it comes to quantitative easing than the other central banks have had, and that’s why they’ve been so reluctant to do it,” he said.

Explore Other Options

Erlam thinks that the ECB won’t actually end up doing quantitative easing because of those aspects, in addition to Germany and other countries being so against it. Instead, he thinks the central bank will some different approaches and possibly even delve into negative interested rates.

More bad news for Europe weighs further on sentiment http://t.co/P5F0JdrWQ2 #eurozone #ECB #US #Fed #UK #BoE #markets

— Craig Erlam (@Craig_AlpariUK) October 14, 2014

“I think they’re going to try and find a way to be a lot more creative on that side of things because I think quantitative easing is just going to be too complex, too difficult and could make things a lot more complicated going forward,” he said.

Erlam also talked about key earnings from this week and last week’s sell-off.

Check out his full interview here:

Don’t forget to tune in to Benzinga’s #PreMarket Prep Monday-Friday 8-9:45 a.m. ET all of the premarket info, news and data needed to start the trading day.