Some key questions about the new quantitative easing policy launched by the European Central Bank today.
What does QE mean?
The ECB is effectively printing money by buying government bonds - following a policy previously used by the US and the UK to stimulate economic growth.
Why is it doing this now?
The euro zone faces stagnating growth and has seen inflation plunging to minus 0.2% threatening a damaging spiral of falling prices that it is feared would lead to consumers putting off spending and firms delaying investment.
Why doesn't it just cut interest rates?
Interest rates have already been slashed to 0.05% while cheap credit has been offered to banks in order to stimulate lending. Buying up these bonds - parcels of state debt - increases the amount of money circulating in the economy creating more stimulus.
Why hasn't it done this before?
Launching QE in the euro zone is fraught with political difficulties because the bloc includes 19 sovereign states, some of whose debt is more risky than others - notably Greece. Powerhouse Germany may be reluctant to see its taxpayers bail out the rest.
What will this mean for the euro?
The euro has been plunging in anticipation of QE because lower effective interest rates make it a less attractive currency in which to invest.
