ECB Announces Quantitative Easing Following Bank Of England

October 11 00:00 2011

NEW YORK, October 10 ( – The European Central Bank (ECB) is following the lead given by the Bank Of England and taking the bull of the financial crisis by its horns. The ECB President Jean Claude Trichet announced the banks decision to offer more liquidity by purchasing $53 billion in covered bonds from various banks and governments.

This news comes as the European Central Bank believes that the threat of the crisis can be the cause of the crisis itself. The belief that a Greek default is almost certain has spread panic amongst financial institutions in Europe. They are not lending to each other and/or the governments as they do not who has what exposure to toxic assets. This  has created a problem of liquidity.

To counter this, the European Central Bank, like the Bank of England has taken two fold measures. The measures include the bond buyout as stated above. It also includes ECB’s decision to offer unlimited one year credit to the banks in Europe to protect them from falling prey to run on the banks.

However, ECB also faces similar issues as the bank of England. This quantitative easing is supposed to create inflation in an already inflation ridden economy.