QE in CEE: What you need to know
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QE in CEE: What you need to know

Central banks in emerging Europe have started buying local government bonds in response to the Covid-19 crisis. Has quantitative easing arrived in the region? And, if so, will it work?


Until very recently, bond buying by central banks was a phenomenon limited to the world’s largest and most advanced economies. As the Covid-19 crisishas deepened, however, policymakers in smaller and less developed markets have taken a leaf out of their book.

The epicentre of this new trend is central and eastern Europe. Recently, central banks in Poland, Romania, Croatia and Hungary have all bought local government bonds in the secondary market. The Czech National Bank (CNB) has said it may follow suit.

Inevitably, these initiatives prompted some observers to hail the arrival of quantitative easing (QE) in CEE. Were they correct?

No, says Liam Peach, CEE analyst at Capital Economics.

 liam peach cap econ 160x186

Liam Peach,
Capital Economics

“The QE programmes we’ve seen in advanced economies since 2009 were purely intended to reduce and flatten the yield curve when short-term interbank rates became so low that central banks were unable to use them as a policy tool,” he says.

That is not the case in CEE. Even after several recent rounds of rate cuts, none of the non-eurozone economies in the region is at the zero bound.

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