M&G’s Isaacs: Maybe the ECB is moving towards QE


M&G fund manager Stefan Isaacs is expecting the European Central Bank to eventually embark on quantitative easing, following yesterday’s unprecedented forward guidance on interest rates.

Isaacs, who manages the £2.3bn M&G European Corporate Bond fund, points to ECB president Mario Draghi’s comments as being uncharacteristically similar to the UK and US in terms of guidance.

At a monetary policy meeting yesterday, Draghi surprised many by giving a forward-looking statement regarding ECB policy – saying the bank would keep interest rates at a historic low for an “extended period” – for the first time ever

Along with the IMF publicly urging the ECB to change its mandate and embark upon a QE programme, Isaacs sees this as a move closer to the UK and US counterparts but recognises there will still be opposition from the likes of Germany.

Isaacs says: “The ECB clearly believes that its next move would be to cut rates further in response to a weaker outlook. Buying time seems to be the current approach.

“QE may be some way off, and would no doubt see massive objections from Berlin, but in the same way that the ECB never pre commits, maybe just maybe, QE will be on the table sooner than the market is currently anticipating.”