More ECB Easing Could Be On Tap In The Distant Future

The euro continued its steady slide on Thursday, weighed down by the ECB’s aggressive policy change and a widening gap between US and European bond yields.

The common currency traded at $1.3537 at 7:20 GMT on Thursday morning following comments from the ECB that more easing could be on the horizon.

The Wall Street Journal reported that the European Central Bank’s Governing Council said the bank should prepare for a large scale asset purchase program similar to that seen in the US.

At last week’s meeting, the bank announced that it would enact a targeted loans program that was designed to spur on lending from eurozone banks, but the size of the package is nowhere near that of the US’ quantitative easing program.

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The comments, made by Ardo Hansson during a phone interview, indicate that the ECB may not have shut the door on further stimulus measures. Hansson said that the bank will need to lay the foundation for such a program, but that any action in the near term would be premature.

Hansson also confirmed that the ECB is planning to maintain its’ extremely low interest rates for an “extended period," and that the bank would wait to see how the changes made last week will impact the bloc’s stalling recovery.

Eurozone inflation has been an ongoing problem for months as the figures have been dropping dangerously close to zero. In May inflation was at 0.5 percent, far below the ECB’s two percent target. 

The loans package offered by the ECB is expected to come into effect during the second half of the year, so the bank will likely hold off on any further action until the effects of the new stimulus can be measured.