The helicopter will have to wait

Last Thursday the European Central Bank (ECB) declared, through its president Mario Draghi, that it could continue the buyback of assets beyond March 2017, end of the current plan. The ultimate aim of the ECB is to increase inflation, measured by the consumer price index. The ECB foresees an inflation of only 0.2% in 2016, 1.2% in 2017 and 1.6% in 2018. The aim of the ECB is an inflation rate of 2%.
By not announcing an extension defined in time nor in amount, the ECB disappointed analysts’ expectations. On the other side, Mr. Draghi said to be ready to consider other measures to stimulate inflation. Even if he said to have a large range of options available, the buyback of corporate stocks, as some economists suggested, was not discussed by the Governing Council. Neither did it consider “helicopter money”, an idea according to which the ECB would distribute money to households in order to boost consumption.
The BCE has certainly reached the limits of its possibilities, especially with regards to negative rates. It is now the turn of the States to take fiscal measures to stimulate the economy.