ECB's Draghi needs more radical instruments

The European Central Bank would increase the size of its programme of quantitative easing, but what was really needed were “more radical instruments [from the ECB]”, Kenneth Rogoff, an ex-International Monetary Fund chief economist told Bloomberg TV.

Speaking on the sidelines of the World Economic Forum in Davos, Switzerland, the economist said “[ECB president Draghi] can do more QE, he probably will. He’ll probably press ahead, but unless he can change more radically his instruments, it’s not easy to do.”

Just as some analysts had in recent days been trimming their forecasts for rate hikes from the US Federal Reserve in 2016, the opposite had been taking place on this side of the Pond.

A survey conducted by Bloomberg on 18 January showed that 60% of analysts it polled expected Draghi to announce further stimulus in 2016, up from the 40% who forecast that in December.

“QE is of limited effectiveness [Draghi, has] limited tools,” Rogoff added.