More European stimulus needed, says Doll
Escape from Europe’s “cruel cycle of recession” could hinge on mitigating fears of inflation in Germany, says BlackRock’s chief equity strategist Bob Doll.
Doll says the European Central Bank (ECB) has done the least among central banks in terms of stimulus and argues monetary stimulus from the central bank is the most effective means of stabilising the global financial system.
He explains: “Investors can only hope that weakening German growth, falling inflation and declining German government bond yields will dampen concerns about inflation among Germans.
“If so, the ECB may then have the reason and leeway to launch another round of quantitative easing (QE) with the specific aim of narrowing rising sovereign debt yields and restoring stability in the financial system.”
In the US, Doll says mounting speculation regarding another round of quantative easing from the Federal Reserve is unlikely to emerge. (article continues below)
He adds: “We are dubious of such a move since US Treasury yields are at new historic lows, the economy continues on a modest but reasonable growth path and even the long-ailing housing market is stabilising.”
Looking forward, he forecasts central banks to keep interest rates low as headline inflation continues to drop, as stalling global growth is also likely to bring down headline rates.
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