Inflation Readings Are Worrying Will the ECB Increase Bond Purchases?

 Goldman Sachs Group Inc (NYSE: GS) today issued a forecast that the European Central Bank (ECB) is expected to increase its Covid-19 bond purchase program by 400 billion euros ($ 470 billion) in December, after weakening European zone inflation readings .

The ECB is likely to extend the purchase of emergency assets known as PEPP which will last until the end of 2021 as analysts at American banks said on Monday. Further, the reinvestment of mature assets under the plan will continue until the end of 2023 and it is expected that the central bank will also have the possibility to target the purchase of high-yield bonds.

Goldman analysts argue that the increase in volumes in PEPP tends to be more effective in driving economic recovery in the European region than in lowering interest rates or expanding common asset purchase programs.

Speculation of an increase in monetary easing is due to the recent increase in the rate of Covid-19 infection in Spain and France until a drop in core European inflation fell by 0.2% in September.

The Euro continued to strengthen against the US dollar with a strengthening of 0.60% at 1.1786 as at 10.30 p.m.