ROBERT SIEGEL, HOST:
For all of you central bank junkies who were missing quantitative easing, it's back - with a European twist this time. Threatened by deflation and recession, the European Central Bank finally launched a massive bond buying stimulus program today. It's much like the Federal Reserve's quantitative easing, which ended in October. NPR's John Ydstie has details on the trillion euro program.
JOHN YDSTIE, BYLINE: The European version of quantitative easing involved bond purchases by the 19 central banks from the eurozone countries. Mario Draghi, head of the European Central Bank, which will manage the new program, outlined it this morning.
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MARIO DRAGHI: The combined monthly purchases of public and private sector securities will amount to 60 billion euros.
YDSTIE: That's the monthly figure for the program, which will run through September 2016. During that time, the Europeans will pump more than 1.1 trillion euros, about $1.3 trillion, into their financial system, says Nariman Behravesh, chief economist at IHS global.
NARIMAN BEHRAVESH: The goal here is obviously to kick start growth in the eurozone and to reduce the risk of broad-based deflation.
YDSTIE: Deflation means falling prices. And it's as threatening to economic growth as rapid inflation, says Jacob Kirkegaard of the Peterson Institute for International Economics. He says deflation causes consumers to hold off purchases waiting for prices to decline more.
JACOB KIRKEGAARD: Then consumption falls, and growth falls. And the economic activity basically falls.
YDSTIE: Deflation has afflicted Japan's economy for much of the past two decades. The euro area experienced a bit of deflation in December. And that helped spur the ECB to act. Nariman Behravesh says just the anticipation of quantitative easing in Europe has triggered a fall in the value of the euro that will help fight deflation.
BEHRAVESH: A weaker currency is inflationary because it means the price of imported goods goes up. The imported goods are more expensive. And so that adds to inflationary pressures.
YDSTIE: Another aim of quantitative easing is to boost growth. When central banks by bonds, they create money, channeling it into the financial system. That lowers interest rates, stimulating borrowing, and thereby encouraging growth. The problems, says Jacob Kirkegaard, is that interest rates are already very low in Germany, and even in former crisis countries like Spain and Italy, and may not go down much more.
KIRKEGAARD: There probably isn't going to be much oomph, if you like, or much - much gasoline in that channel.
YDSTIE: Today, Mario Draghi made clear that defeating deflation is the main goal of Europe's quantitative easing. Kirkegaard says he's hoping that the program will change long-term inflation expectations in the euro area.
KIRKEGAARD: Basically, what markets and businesses and consumers think inflation will be in Europe in, say, five years or ten years, will stop falling.
YDSTIE: And begin rising. That should begin to spur investment in consumption and ultimately repair the economy. Both Kirkegaard and Behravesh think the ECB's quantitative easing will be a net positive for the U.S. and global economies. Though, it will dampen demand for U.S. exports in Europe. Investors seem to agree, as global stock markets moved up sharply today. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.